FEDERAL COURT OF AUSTRALIA

Michell, in the matter of Aizome1 Pty Ltd (in liq) v Millar [2019] FCA 2169

ORDERS

THE COURT DECLARES THAT:

1.    The payments referred to in Annexure A to these orders are each an unreasonable director-related transaction of the third plaintiff (Company) within the meaning of s 588FDA of the Corporations Act 2001 (Act) and are voidable pursuant to s 588FE(6A) of the Act.

2.    The defendant contravened s 588G of the Act by failing to prevent the Company from incurring the debts referred to in Annexure B to these orders in circumstances where, at the time each debt was incurred:

(a)    the defendant was a director of the Company;

(b)    the Company was insolvent and there were reasonable grounds for suspecting that the Company was insolvent; and

(c)    a reasonable person in a like position to the defendant in the Company and in the Company’s circumstances would have been aware that there were grounds for suspecting that the Company was insolvent at that time.

THE COURT ORDERS THAT:

3.    Pursuant to rule 10.23 and 10.24(c)(i) of the Federal Court Rules 2011 (Cth), the following documents are taken to have been served on the defendant on the dates mentioned below by respectively mailing them to or leaving them at 44 Victoria Road, Hawthorn East, Victoria:

(a)    the interlocutory application filed on 4 October 2019 and the affidavit of John Buordolone sworn 4 October 2019 are taken to have been served on 14 October 2019; and

(b)    the orders of the Court made on 1 November 2019 and the written submissions of the plaintiffs filed on 1 and 8 November 2019 are taken to have been served on 9 November 2019.

4.    Pursuant to paragraph 588FF(1)(a) of the Act, the defendant pay to the Company the sum of $98,269.16, being the amount that the Company has paid pursuant to the unreasonable director-related transactions referred to in Annexure A.

5.    Pursuant to s 588M of the Act, the defendant pay to the Company the sum of $2,229,562.65, being the amount of loss and damage suffered by the creditors as referred to in Annexure B, as a debt due to the Company.

6.    The defendant pay the plaintiffs’ costs of and incidental to this proceeding as agreed or taxed.

7.    The proceeding be otherwise adjourned to a date to be fixed.

Note:    Entry of orders is dealt with in rule 39.32 of the Federal Court Rules 2011 (Cth).

Annexure A

Unreasonable Director Related Transactions

Annexure B

Trading whilst insolvent debt

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    This is an application by the plaintiffs for summary judgment against the defendant under s 31A of the Federal Court of Australia Act 1976 (Cth) and rule 26.01 of the Federal Court Rules 2011 (Cth) (Rules).

2    The third plaintiff (Aizome1) was incorporated on 29 September 2014. The first and second plaintiffs were appointed as joint and several liquidators of Aizome1 on 13 July 2016 by order of the Supreme Court of Victoria. The winding up application was filed on 6 June 2016. Aizome1 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 was filed: see ss 9, 91 and 513A of the Corporations Act 2001 (Cth) (Act).

3    The defendant (Mr Millar) was the sole director and secretary of Aizome1 from the date of incorporation and continued in those positions until Aizome1 was placed into liquidation. Mr Millar is also a shareholder of Aizome1.

4    By an originating process filed in this Court on 3 June 2019, the plaintiffs sought various orders for, amongst other things, compensation for breaches by Mr Millar of his statutory duties owed to Aizome1, orders arising from the entering into of voidable transactions and compensation for trading whilst insolvent. The application was supported by an affidavit of the first plaintiff, Mr Stephen John Michell, sworn 3 June 2019.

5    On 2 July 2019, Mr Millar filed a notice of address for service, being the offices of his then solicitors, SBA Law, in Melbourne. By rule 10.11 of the Rules, the originating process is therefore taken to have been personally served on Mr Millar.

6    On 4 July 2019, I made orders by consent for the matter to proceed by way of pleadings and set a timetable for the filing of points of claim and defence, and listed the matter for further case management on 20 September 2019.

7    On 15 August 2019, the plaintiffs filed and served a statement of claim.

8    Mr Millar failed to file a defence in accordance with the orders made on 4 July 2019. On 17 September 2019, the plaintiffs' solicitors wrote to Mr Millar's solicitors inquiring as to how much additional time was required for the filing of a defence. No response was received.

9    On 18 September 2019, Mr Millar's solicitors filed a notice of ceasing to act and stated that the last known residential or business address of Mr Millar was 44 Victoria Road, Hawthorn East, Victoria. An ASIC search of Aizome1 shows that address as the address for Mr Millar (as a director). The evidence shows that that is the residential address of Mr Millar’s sister. Further, the evidence shows that Mr Millar’s sister has been examined in connection with the liquidation of Aizome1 and the liquidators have corresponded with lawyers for Mr Millar’s sister in relation to various payments made by Aizome1.

10    Mr Millar did not appear at the case management hearing on 20 September 2019. On the application of the plaintiffs, I made orders for the filing and service of any application for summary judgment by the plaintiffs and supporting affidavits, and listed the matter for further case management on 1 November 2019.

11    On 4 October 2019, the plaintiffs filed and served an application for summary judgment which was supported by an affidavit of the plaintiffs’ solicitor, Mr John Buordolone, sworn 4 October 2019. By affidavit of service sworn 30 October 2019, Mr Buordolone deposed that he served those documents on Mr Millar by mailing them to the address in Hawthorn East on 8 October 2019. By rule 10.32 of the Rules, the documents are taken to have been served on 14 October 2019.

12    On 16 October 2019, the plaintiffs filed and served an application for a freezing order against Mr Millar under rule 7.32 of the Rules. The application was supported by a further affidavit of Mr Buordolone sworn 16 October 2019. On 18 October 2019, Davies J made freezing orders against Mr Millar.

13    At the case management hearing on 1 November 2019, I made orders listing the plaintiffs’ application for summary judgment for hearing on 14 November 2019 and directing that the plaintiffs serve the defendant with a copy of the orders and its written submissions in respect of the application by leaving them with a person over the age of 18 years of age at the Hawthorn East address or, if no such person is available, in the letterbox of that address. By affidavit sworn 11 November 2019, a process server, Mr Justin Paul Hogg, deposed that on 9 November 2019 he served the abovementioned documents by leaving them in the letterbox of the Hawthorn East address because he was unable to make contact with anyone at that address.

14    Since his solicitor filed a notice of ceasing to act, Mr Millar has not taken any step in the proceeding. In particular, he has not filed a defence and he has not filed any material in opposition to the application for summary judgment.

15    By their submissions filed on 8 November 2019, the plaintiffs confined the causes of action and relief on which they seek summary judgment under their originating process to the following:

(a)    a declaration that the payments specified below are each an unreasonable director-related transaction within the meaning of s 588FDA of the Act and are voidable pursuant to subsection 588FE(6A) of the Act;

(b)    an order under paragraph 588FF(1)(a) of the Act directing Mr Millar to pay to Aizome1 the sum of the payments referred to in paragraph (a);

(c)    a declaration that Mr Millar contravened s 588G of the Act by failing to prevent Aizome1 from incurring the debts specified below; and

(d)    an order under s 588M of the Act directing Mr Millar to pay Aizome1 the sum of the debts referred to in paragraph (c) as a debt due to Aizome1.

16    I heard the plaintiffs’ application for summary judgment on 14 November 2019. Following the hearing, on 27 November 2019 the plaintiffs filed proposed orders which confined their application to a narrower set of transactions undertaken by Aizome1. For the reasons that follow, the plaintiffs are entitled to summary judgment in respect of the identified transactions.

Relevant legal principles

17    The Court has power to give judgment for one party against another in relation to the whole or any part of a proceeding if the Court is satisfied that the defending party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. In British American Tobacco Australasia Limited v Taleb (No 3) [2013] FCA 80, Dodds-Streeton J summarised the relevant legal principles (at [22]-[25]):

[22] In Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 (“Adnunat”), Sundberg J relevantly summarised, at [37], the principles applicable to the operation of s 31A as follows:

(a) The Court must assess the strength of the allegations made by reference to the pleadings, the affidavits and any other evidence adduced.

(b) The Applicant bears the onus of demonstrating that the Third and Seventh Respondents have no reasonable prospect of success. However, if the Applicant establishes a prima facie case for summary judgment, the Third and Seventh Respondents must identify specific factual or evidentiary matters which necessitate a trial.

(c) In order to have reasonable prospects of success, the Respondents must have prospects of success that are “real” and not “fanciful” or even “merely arguable”.

[23] In Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd [2008] FCAFC 60; (2008) 167 FCR 372 (“Jefferson Ford”), Gordon J stated at [127]:

... it must be emphasised that once a moving party has established a prima facie case that the opponent has no reasonable prospect of success, the opposing party must respond by pointing to specific factual or evidentiary disputes that make a trial necessary; general or non­particularised denials will be insufficient to defeat the motion: see Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [22]. In other words, it is inappropriate in defence of a claim for judgment under s 31A of the Federal Court Act to seek to defend by merely putting a claimant to formal proof: Vans Inc v Offprice.Com.Au Pty Ltd [2006] FCA 137 at [12]. This is not a new concept. It finds earlier reflection in ss 190(4) and 191 of the Evidence Act 1995 (Cth) and O 33, O 34 and O 34B of the Federal Court Rules.

[24] In Jefferson Ford, Finkelstein J stated at [22]:

Perhaps one should look further at what Parliament intended to achieve. In O 14 cases, to show cause against an application for summary judgment, a defendant is required to go into some detail and state clearly and concisely the facts to be relied upon: Country Estates Pty Ltd v Leighton Contractors Pty Ltd (1975) 49 ALJR 173 at 173-174. This requires only the material facts to be stated as distinct from the evidence that would establish those facts: Ritter v North Side Enterprises Pty Ltd (1975) 132 CLR 301 at 304. If the test under s 31A raises the hurdle for the opposing party, it may be necessary for that party at a minimum to provide an outline of the evidence that will be relied upon. The outline must be sufficient to show that there is a genuine dispute about facts that are material to the outcome of the case. That will enable the judge to make some assessment of the merits. It would not, of course, be necessary, in most cases, to require the party to do more than provide an outline, because that would turn the summary judgment application into a trial.

[25] In QS Holdings Sari v Paul's Retail Pty Ltd [2011] FCA 853; (2011) 92 IPR 460, Kenny J referred to Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 and observed at [16]:

No hard and fast rule can be laid down as to when summary judgment is available. Much depends on the case at hand. None the less, generally speaking, summary judgment would appear appropriate when well established propositions of law deny the prospect of success. Summary judgment would appear inappropriate where there are "factual issues capable of being disputed and in dispute". See generally Spencer at [25] per French CJ and Gummow J. Generally speaking, it also remains true to say, as Gordon J did in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372; 246 ALR 465; 103 ALD 505; [2008] FCAFC 60 at [127] (Jefferson Ford) that "it is inappropriate in defence of a claim for judgment made under s 31A of the Federal Court Act to seek to defend by merely putting a claimant to formal proof". There are, of course, a variety of circumstances that may attract summary judgment under s 31A of the Federal Court Act and, on each occasion, the critical question is that set by the statute - has the moving party persuaded the court that the opposing party has no reasonable prospect of success?

18    In the absence of any defence, denial of the allegations on reasonable grounds or indication of definite facts pointing to a defence, Dodds-Streeton J concluded that a respondent in that proceeding had no reasonable prospect of success and that summary judgment was appropriate.

Admissions and evidence relied on

19    As noted earlier, on 4 July 2019, I made orders by consent for the filing of points of claim and defence. On 15 August 2019, the plaintiffs filed and served a statement of claim. Mr Millar has not filed a defence. Accordingly, under rule 16.07(2) of the Rules, Mr Millar is deemed to have admitted the allegations in the statement of claim.

20    In addition to those deemed admissions, the plaintiffs also rely on the following affidavits:

(a)    Stephen John Michell sworn 3 June 2019;

(b)    John Buordolone sworn 4, 16 and 30 October 2019; and

(c)    Justin Paul Hogg sworn 11 November 2019.

21    The affidavit of Mr Michell deposed to the investigations and actions taken by the liquidators in the winding up of Aizome1. Amongst other things, Mr Michell deposed that:

(a)    he has been provided with some books and records of Aizome1;

(b)    he has been able to extract from Aizome1’s computers some records relating to investments made by various parties in Aizome1, share registry information and details of guarantees given by Mr Millar;

(c)    he does not consider that he has received all of the books and records of Aizome1 and the books and records are not accurate;

(d)    he believes that Aizome1’s financial affairs have not been properly recorded for reasons that include:

(i)    the entries into Aizome1’s Xero accounting software appear to have been made in excess of 12 months after the transactions occurred;

(ii)    there are a number of transactions identified by Aizome1’s file obtained from the Australian Transaction Reports and Analysis Centre (AUSTRAC) which cannot be identified in Aizome1’s Xero accounts or via any other source documents;

(iii)    the Xero accounts are substantially unreconciled; and

(iv)    the cash at bank recorded in the Xero accounts are materially incorrect; and

(e)    he does not consider that the books and records obtained comply with s 286 of the Act in that they do not correctly record and explain transactions and Aizome1’s financial position and performance and would not enable true and fair financial statements to be prepared and audited.

22    I accept Mr Michell’s opinion that Aizome1’s books and records do not comply with s 286 of the Act, which opinion applies to the whole period in which Aizome1 was incorporated. Accordingly, for the purposes of this proceeding, a presumption arises under s 588E(4) of the Act that Aizome1 has been insolvent since incorporation.

23    Mr Michell exhibited copies of bank statements for three accounts maintained by Aizome1, which are referred to below and which identify various payments from those accounts that are the subject of the present application by the liquidators.

24    By his affidavit sworn 4 October 2019, Mr Buordolone gave evidence in relation to the public examination of Mr Millar and documents produced by him including, in particular, bank statements that are relied on by the liquidators. Mr Buordolone also adduced in evidence various proofs of debt lodged by creditors which are the subject of the present application by the liquidators.

25    Mr Buordolone’s affidavit sworn 16 October 2019 was read at the hearing of the liquidators’ application for freezing orders against Mr Millar on 18 October 2019. It is also relied on by the liquidators in this application and exhibits transcripts of other public examinations conducted in the course of the liquidation.

Unreasonable director related transactions

26    Subsection 588FE(1) provides, relevantly, that if a company is being wound up, a transaction of the company may be voidable because of subsection (6A). Subsection (6A) provides that a transaction is voidable if it is an unreasonable director-related transaction of the company and it was entered into, or an act was done for the purpose of giving effect to it, during the 4 years ending on the relation back day, or after that day but on or before the day when the winding up began.

27    Paragraph 588FF(1)(a) provides that where, on the application of a company’s liquidator, a court is satisfied that a transaction of the company is voidable because of s 588FE, the Court may make an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction. Subsection 588FF(4) provides that, in the case of a voidable transaction that is an unreasonable director-related transaction, the Court may make orders only for the purpose of recovering for the benefit of creditors of the company the difference between (a) the total value of the benefits provided by the company under the transaction and (b) the value (if any) that it may be expected that a reasonable person in the company’s circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c).

28    Unreasonable director-related transactions are defined in subsection 588FDA(1) in the following terms:

(1)    A transaction of a company is an unreasonable director-related transaction of the company if, and only if:

    (a)    the transaction is:

          (i)    a payment made by the company; or

       (ii)    a conveyance, transfer or other disposition by the company of property of the company; or

          (iii)    the issue of securities by the company; or

       (iv)    the incurring by the company of an obligation to make such a payment, disposition or issue; and

    (b)    the payment, disposition or issue is, or is to be, made to:

          (i)    a director of the company; or

          (ii)    a close associate of a director of the company; or

      (iii)    a person on behalf of, or for the benefit of, a person mentioned in subparagraph (i) or (ii); and

    (c)    it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction, having regard to:

   (i)    the benefits (if any) to the company of entering into the transaction; and

   (ii)    the detriment to the company of entering into the transaction; and

   (iii)    the respective benefits to other parties to the transaction of entering into it; and

   (iv)    any other relevant matter.

29    The statement of claim alleges as follows:

Bank accounts

 6.     At all relevant times, the Company operated the following bank accounts:

    a. Westpac Bank Account 033 169 487679 - Cheque / Operational Account.

    b. Westpac Bank Account 033 169 487687 - Business Cash Reserve Account.

    c. NAB 083 166 74 273 8039 - NAB Account.

7.     Mr. Millar was the sole signatory of the Cheque / Operational Account and the Business Cash Reserve Account.

30    The statement of claim further alleges that Aizome1 entered into the following transactions (amongst others) during the two year period ending on the relation back date (the item numbers correspond to item numbers in the statement of claim):

31    In relation to each of the above transactions, the statement of claim alleges that:

38.     Each of the payments … were "transactions" within the meaning of section 9 of the Act…

39.     The payments were made within a two year period ending on the Relation Back Date.

40.     The Company and Mr Millar were parties to the payments.

41.     The payments were made to Mr Millar or for the benefit of Mr Millar.

42.     A reasonable person in the Company's circumstances would not have made the payments having regard to:

    a. the benefits to the Company of making the payments;

    b. the detriment to the Company of making the payments;

    c. the benefit to Mr Millar of receiving the payments; and

    d. any other relevant matters.

43.     By reason of the matters set out above, each of the payments are "unreasonable director-related transactions" pursuant to section 588FDA of the Act therefore voidable pursuant to section 588FE(6A) of the Act and the Court may make orders under section 588FF of the Act.

32    Each of the above allegations is the subject of a deemed admission by Mr Millar by reason of his failure to file a defence.

33    I am satisfied that the payments referred to in the above table are each an unreasonable director-related transaction within the meaning of s 588FDA for the following reasons.

34    First, the evidence shows, and the fact is the subject of a deemed admission, that the above transactions involved payments from Aizome1’s bank accounts, thereby satisfying the requirement in paragraph 588FDA(1)(a).

35    Second, the evidence shows, and the fact is the subject of deemed admissions, that Mr Millar was at the relevant time a director of Aizome1. There are deemed admissions that Mr Millar was a party to the transactions and that he was the recipient of the payments. Accordingly, the requirement in paragraph 588FDA(1)(b) is satisfied. However, I note that in respect of item 57 in the table above, the evidence showed that the amount received by Mr Millar was $9,900 and not $10,000 as alleged in the statement of claim.

36    Third, there is a deemed admission that a reasonable person in Aizome1’s circumstances would not have made the payments having regard to:

(a)    the benefits to Aizome1 of making the payments;

(b)    the detriment to Aizome1 of making the payments;

(c)    the benefit to Mr Millar of receiving the payments; and

(d)        any other relevant matters,

thereby satisfying the requirements in paragraph 588FDA(1)(c).

37    I am also satisfied that the Court should make orders pursuant to paragraph 588FF(1)(a) of the Act for Mr Millar to pay compensation to Aizome1 in an amount equal to the aggregate of those amounts. Mr Millar has not appeared to oppose the liquidators’ application. As a consequence, there is no evidence before the Court that Aizome1 received any benefit from the payments that were made. The value of the benefits provided by Aizome1 is equal to the aggregate sum of the payments. Accordingly, I will make the order sought by the liquidators that Mr Millar pay Aizome1 that aggregate amount, being $98,269.16.

Trading whilst insolvent

38    Section 588G imposes a duty on company directors to prevent insolvent trading. Relevantly, the section provides as follows:

(1)      This section applies if:

      (a)      a person is a director of a company at the time when the company incurs a debt; and

(b)     the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and

(c)      at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; and

(d)  that time is at or after the commencement of this Act.

(2)    By failing to prevent the company from incurring the debt, the person contravenes this section if:

(a)     the person is aware at that time that there are such grounds for so suspecting; or

(b)      a reasonable person in a like position in a company in the company’s circumstances would be so aware.

39    Section 588M enables a liquidator to recover from a director who has contravened s 588G in relation to a debt incurred by a company the amount of loss or damage that the relevant creditor has suffered in relation to the debt because of the company’s insolvency. Relevantly, the section provides as follows:

(1)      This section applies where:

(a)      a person (in this section called the director) has contravened subsection 588G(2) or (3) in relation to the incurring of a debt by a company; and

(b)      the person (in this section called the creditor) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency; and

(c)      the debt was wholly or partly unsecured when the loss or damage was suffered; and

(d)      the company is being wound up;

whether or not:

(e)      the director has been convicted of an offence in relation to the contravention; or

(f)      a civil penalty order has been made against the director in relation to the contravention.

(2)    The company’s liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage.

40    The statement of claim alleges as follows:

Trading Whilst Insolvent - Mr. Millar

56.    Further, between the date of incorporation and the date of liquidation (Relevant Period), the Company incurred debts in the total sum of $2,594,649.54 (Debts) to those creditors set out in Annexure "A" (Creditor).

57.    Mr. Millar was a director of the Company during the Relevant Period.

58.    Since incorporation the Company has been insolvent. [Particulars not reproduced]

59.    Mr Millar was aware at all times during the Relevant Period that the Company was insolvent or alternatively would become insolvent.

60.    Further or in the alternative, a reasonable person in the position of Mr Millar would be aware that there were grounds for suspecting that the Company was insolvent or would become insolvent.

61.    By reason of the matters set out above, Mr Millar has contravened section 588G(2) of the Act in relation to the incurring of the Debts.

62.    The Creditor has suffered loss and damage because of the Company's insolvency.

PARTICULARS

The Debts still remain due and owing.

63.    Each of the Debts was wholly unsecured when the loss and damage was suffered.

64.    The Company is being wound up.

65.    By reason of the matters set out above, the Liquidators may recover from Mr Millar as a debt due to the Company an amount equal to the loss and damage set out above.

41    Annexure A to the statement of claim included the debts set out in the following table:

42    Each of the above allegations in the statement of claim is the subject of a deemed admission by Mr Millar by reason of his failure to file a defence.

43    For the following reasons, I am satisfied that Mr Millar contravened s 588G of the Act by failing to prevent Aizome1 from incurring the debts referred to in the above table, and that the plaintiffs are entitled to recover from Mr Millar those amounts as a debt due to Aizome1 under s 588M of the Act.

44    First, the evidence shows, and it is the subject of a deemed admission, that Mr Millar was the sole director of Aizome1 at all relevant times.

45    Second, I have also found, based on Mr Michell’s uncontested opinion that Aizome1’s books and records do not comply with s 286 of the Act, that for the purposes of this proceeding a presumption arises under subsection 588E(4) of the Act that Aizome1 has been insolvent since incorporation. That fact is also the subject of a deemed admission.

46    Third, I accept the plaintiffs’ submission that, at all relevant times, there were reasonable grounds for suspecting that Aizome1 was insolvent. That fact is the subject of a deemed admission. The evidence also indicates that:

(a)    Aizome1 failed to file income tax returns for the financial year ended 30 June 2015, 2016 and 2017;

(b)    Aizome1 failed to meet its statutory obligations with respect to the payment of the superannuation guarantee charge for the period 30 June 2015 to 31 December 2015;

(c)    Aizome1 never generated any revenue;

(d)    Aizome1 failed to pay wages to Luke James, Sarah Tikfesis and Stephen Bidinger;

(e)    Aizome1 failed to pay an amount agreed to be paid to its chief operating officer, David Pearce, in settlement of an unfair dismissal claim;

(f)    employees of Aizome1 were required to fund company expenses using their personal credit cards due to a lack of funds available to the company;

(g)    Aizome1 failed to pay its creditors in a timely manner and received numerous demands for payment; and

(h)    Aizome1 was not able to pay its debts when they fell due.

47    Fourth, for the same reasons, I accept the plaintiffs’ submission that, at all relevant times, a reasonable person in a like position to Mr Millar in a company in Aizome1’s circumstances would have been aware that there were reasonable grounds for suspecting that Aizome1 was insolvent. That fact is also the subject of a deemed admission.

48    Fifth, I am satisfied that the debts referred to in the above table were incurred. The evidence shows that proofs of debt have been lodged in the liquidation in respect of those amounts and the existence of the debts is also the subject of a deemed admission.

49    Sixth, on the basis of Mr Michell’s affidavit, I am satisfied that the creditors to whom the debts are owed have suffered loss and damage in the amounts of the debts because, due to the company’s insolvency, the debts remain due and owing. That fact is also the subject of a deemed admission.

50    Seventh, on the basis of Mr Michell’s affidavit, I am satisfied that the debts were wholly unsecured when the loss and damage was suffered. That fact is also the subject of a deemed admission.

51    Accordingly, it is appropriate to make a declaration that Mr Millar contravened s 588G of Act by failing to prevent Aizome1 from incurring the debts identified by the plaintiffs to an aggregate amount of $2,229,562.65 and an order directing Mr Millar to pay that amount to the plaintiffs under s 588M of the Act.

Conclusion

52    In conclusion, I am satisfied, on the basis of the evidence before me and the deemed admissions of Mr Millar (arising from his failure to file a defence), that Mr Millar has no reasonable prospect of successfully defending that part of the proceeding that is the subject of the plaintiffs’ application for summary judgment. I will therefore grant the relief sought by the plaintiffs by way of summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) and rule 26.01 of the Rules. I will also order that Mr Millar pay the plaintiffs' costs as agreed or taxed.

53    There are a number of claims raised by the plaintiffs in their originating process that have not been prosecuted to date. For that reason, the plaintiffs also seek an order that the proceeding be adjourned to a date to be fixed. I will also make that order.

Associate:

Dated:    20 December 2019