Federal Court of Australia

Actgall Pty Ltd (in liq) v Morella [2025] FCA 830

ORDERS

THE COURT ORDERS THAT:

1.    The defendants’ application for an adjournment be dismissed.

2.    The first defendant pay the first plaintiff $2,447,518 in respect of the first defendant’s loan account with the first plaintiff, plus:

(a)    interest of $425,583.12 under s 51A of the Federal Court Act 1976 (Cth) (FCA Act) calculated on principal of $2,063,125.00 for the period 21 December 2022 to 18 July 2025; and

(b)    interest of $73,646.52 under s 51A of the FCA Act calculated on principal of $384,393.00 for the period 10 March 2023 to 18 July 2025.

3.    The first defendant and second defendant (jointly and severally) pay the first plaintiff and the second plaintiff $524,467 in respect of the Business Sale, plus prejudgment interest of $18,467.70 under s 51A of the FCA Act for the period 14 February 2025 to 18 July 2025.

4.    The first defendant and third defendant (jointly and severally) pay the first plaintiff and the second plaintiff $145,000 in respect of the RHCF Payments, plus prejudgment interest of $26,116.69 pursuant to s 51A of the FCA Act for the period 8 May 2023 to 18 July 2025.

5.    The defendants pay the plaintiffs’ costs of the proceedings, such costs to be to be assessed on a lump sum basis in accordance with part 4 of the Costs Practice Note (GPN-COSTS).

6.    The plaintiffs file and serve a costs summary and submissions by 25 July 2025.

7.    The determination of the lump sum costs be referred to a registrar, including in accordance with any further process determined by the registrar to whom it is referred.

8.    The proceeding is otherwise dismissed.

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

REASONS FOR JUDGMENT

(Delivered ex tempore; revised from transcript)

STEWART J:

1    Immediately before me is an application by the defendants to adjourn the hearing today. The proceeding is listed for the purpose of hearing and determining the plaintiffs’ application for default judgment against the defendants. The adjournment application is put on two bases. The defendants’ primary submission is for the hearing to be adjourned to, in effect, defeat the default judgment application, on the basis that the matter is now opposed and the defendants should have the opportunity to put on a defence, and for the proceeding to otherwise run its usual course. Alternatively, the defendants submit that the hearing should be adjourned for a short period of time to enable then to put on more evidence supporting their application for an adjournment of the default hearing. In particular, they wish to have the opportunity to file evidence to substantiate the submission before me that they have a reasonably arguable defence to the claims against them.

2    The default judgment application arises because the defendants failed to file any addresses for service after being served, failed to appear at a case management hearing on 27 June 2025, and, in effect, failed to defend the proceeding until yesterday when their solicitors filed a notice of acting. In those circumstances, there were defaults under r 5.22(c) of the Federal Court Rules 2011 (Cth) (FCR), which is to say, a failure to:

... attend a hearing in the proceeding

and under rule 5.22(d), which is to say, a failure to:

... defend the proceeding with due diligence.

3    As mentioned, the adjournment application now arises because the notice of acting was filed only yesterday.

4    The High Court made clear in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; 239 CLR 175 that the types of matters that should be considered in the context of an adjournment application include (a) the explanation for the adjournment, (b) the detriment to the parties and (c) the detriment to the court and other litigants. That is not an exhaustive list.

5    Particularly pertinent to the present matter, it seems to me, are the following considerations. First, the nature of the defaults, and the explanation (or lack thereof) for them. Secondly, since the purpose of the adjournment is to put on a defence, or evidence in support of a possible defence, it is relevant to consider what that defence or evidence might be. And, thirdly, any prejudice or detriment to the parties and other litigants and the Court.

6    I accept that in any case, and certainly in this one, it is a serious matter to deny a party an adjournment, and I emphasise it in relation to this case in particular because, inevitably, given the matters I will come to, the refusal of an adjournment will lead to default judgment. That is not a course to be taken lightly. I would take that course only in a clear case.

7    The first plaintiff is Actgall Pty Ltd (hereafter “the company”), a company in liquidation, and the second plaintiff is its liquidator, Mr Henry Kazar. The first defendant is Mr Francesco Anthony Morella. He is the company’s sole director, and its secretary. The shares in the company are indirectly held by Mr Morella’s family members. The second defendant, Canberra Commercial (ACT) Pty Ltd, and the third defendant, RHCF Pty Ltd, are both companies in which Mr Morella is the sole director and secretary, and, indirectly, the controlling shareholder (through another company, Avellino Pty Ltd, which Mr Morella owns and solely controls).

8    Although there are other claims articulated in the plaintiffs’ concise statement, the claims that the plaintiffs press on the default judgment application are the following. First, the recovery of a loan account debt from Mr Morella in the sum of $2,447,518. Secondly, recovery from Mr Morella and the second defendant, on a joint and several basis, of an amount reflecting the sale of the company’s business to the second defendant the day before the company was placed into liquidation at what is said to be under value. That claim is asserted today in the sum of $524,467, which is the lowest of a range of possible values of that claim obtained by the liquidator. Thirdly, recovery from Mr Morella and the third defendant, on a joint and several basis, of the sum of $145,000, reflecting what are said to be unfair preference payments effected by Mr Morella to the third defendant within the six-month period prior to the appointment of Mr Kazar as liquidator of the company.

9    In order to deal with and decide the matters that arise on the adjournment application, it is necessary to go into some of the background to the proceeding.

10    One can start on 20 September 2022, when the company sold its business to the second defendant (which is the basis for its claim against the second defendant). The following day, on 21 September 2022, the company was placed into liquidation by Mr Morella by a shareholder resolution, and Mr Kazar was appointed liquidator (another liquidator was also appointed, jointly, with Mr Kazar, but he appears to no longer be a liquidator of the company).

11    On 21 December 2022, Mr Kazar wrote a letter of demand to Mr Morella with regard to his loan account, which forms the basis of the first of the three claims just identified. The letter sets out the basis for that claim, in particular that the records of the company in the liquidator’s possession indicated that Mr Morella was a debtor of the company to the extent of a little more than $2 million in respect of an unpaid director’s loan account. A copy of the relevant balance sheet extracts and ledger accounts, as at 21 September 2022, were attached. The liquidator recorded that a preliminary review of the ledger items showed that the items contained within it had been reasonably attributed to Mr Morella’s loan account. Indeed, perusal of those items, or some of them anyway, would seem to amply support that conclusion.

12    The liquidator received a reply by email, on 10 January 2023, from Mr Michael Williams, who is said to be Mr Morella’s accountant. The reply says only the following:

Please note we completed the 2020 and 2021 financials, but have not made any changes to the MYOB files, and it has not been adjusted for several years for the accountant’s year end journals.

I assume you are working off the raw MYOB data. I do not believe the loan balance correctly reflects the flow of money to and from the director and his related entities. Can you please contact me to discuss?

13    Thereafter, on 3 February 2023, Mr Kazar wrote to Mr Morella, seeking delivery of specific books and records under powers available to Mr Kazar as liquidator under the Corporations Act 2001 (Cth). Having received no response, Mr Kazar wrote again to Mr Morella, on 10 March 2023, following up on his request for specific books and records, and adding a request for additional books and records. Mr Kazar also noted, with reference to the loan account claim, that the company’s balance sheet extracted from MYOB, as at 21 September 2022, recorded the net balance of the “Suspense/Queries” account as an asset of the company. He went on to say that a detailed review of the general ledger entries indicated numerous cash withdrawals, cheque payments and electronic payments that appeared to be personal in nature, and that, in the absence of sufficient and appropriate evidence to the contrary, those transactions may need to be added to the loan account payable to the company.

14    I note that, thereafter, it may be that there were settlement discussions or negotiations taking place between the parties. That is because the plaintiffs’ genuine steps statement, which they filed pursuant to s 6 of the Civil Dispute Resolution Act 2011 (Cth), states that, on 17 April 2023, the parties and their respective legal representatives participated in a without prejudice informal conference. Needless to say, no resolution was achieved. In any event, a report to creditors, dated 13 June 2024, records some history with respect to efforts to settle the claims.

15    The report records that investigations conducted following the appointment of Mr Kazar showed that there were the three claims that I have identified, albeit at that time in slightly different amounts, at least in respect of two of the claims. The report records as follows:

On 21 April 2023, my Solicitors issued a demand to the Director and his related entities for payment of the above sums. As a result of the Director’s failure to properly engage and provide a satisfactory response to the demand, examination summonses were issued to him, his related entities and other parties to produce documents and attend Public Examination hearings scheduled for 1 September 2023.

16    I interpose to summarise that the report goes on to say that there were then efforts to settle the matter, with extensive negotiations between the parties and undertakings in relation to continued production of documents and so on. The report then continues as follows:

The Director and his related entities have now submitted an offer of $1.25 million dollars to settle all claims made by the Liquidator, payable as follows:

•    10% on Execution of a Deed of Settlement;

•    40% by no later than 15 December 2024

•    the balance by no later than 30 June 2025.

The settlement sum is to be guaranteed by the director and its related entities with supporting security.

The Liquidator recommends that the offer be accepted for the following reasons:

•    The Director and his related entities have provided sufficient information to the Liquidator that allows an assessment to be made of the ability of these parties to satisfy the claims made against them. The offer strikes an appropriate balance between the extent of the Liquidator’s claims and the capacity of the Director and his related entities to pay.

•    The agreement avoids the inherent uncertainty associated with litigation and forced realisation of assets and associated costs.

•    The Director will provide the sum of $125,000 to be held in trust pending approval of the settlement offer made by the Director and his related entities by creditors.

•    There are to be agreed milestones built into the agreement in relation to the timing of payment of the settlement sum with guarantees and securities provided in support.

17    On 5 July 2024, the creditors by resolution accepted that recommendation and resolved that the offer should be accepted. Clearly, that has not resulted in a resolution of the claims, because here we are. I will come back to some of what is stated in that report.

18    It is then necessary to pay some regard to the chronology of the proceeding, in order to have an appreciation of the nature of the defaults.

19    The plaintiffs commenced the proceeding on 14 February 2025 by filing an originating process and concise statement. On 19 February 2025, there was attempted service of the originating documents on a solicitor, Mr Tsirimokos, who was, or had been, Mr Morella’s solicitor. He replied to say that he did not hold instructions in the matter.

20    On 21 March 2025 the plaintiff’s solicitors, Thomson Geer, instructed a process server, Sharmans, to effect personal service on Mr Morella. Between 28 March and 23 April, Sharmans attempted service six times – four times at Mr Morella’s home, and twice at work – and tried to call Mr Morella five times, all without success. The process server was informed on various occasions, by someone at the relevant premises, that Mr Morella was not there and that it was not known when he would return.

21    On 3 April 2025, Thomson Geer posted, by Express Post, the originating documents to the company defendants at their registered offices. On the same day, Thomson Geer sent an email to Mr Morella asking him who his new solicitors were. He replied the following day, saying that there would be a response within days. There was no response, which is to say, Mr Morella did not identify who his solicitors were who could, or would, receive service of documents on his behalf.

22    On 29 April 2025, having still not achieved service on Mr Morella, the plaintiffs applied for orders for substituted service. The following day, orders were made providing for service on Mr Morella by email and by delivery to his home, and by post. On 1 May 2025, those three methods of substituted service were effected.

23    The matter was then listed for a first case management hearing on 27 June 2025. Mr Morella was notified of that on 23 June 2025 by email, and again on 25 June 2025, by being copied in on further correspondence with my Associate.

24    On 25 June 2025, Mr Mattiussi, the defendants’ present solicitor, was also notified by email of the case management hearing on the 27th. According to his affidavit supporting the adjournment, Mr Matiussi was acting for Mr Morella at that time in relation to the settlement of the claims, but not in relation to the court proceedings. He stated that since late May 2025 he had been focused on resolving the various claims against the defendants.

25    When the matter was called on 27 June 2025, there was no appearance by any of the defendants. Orders were then made listing the proceeding for default hearing on 18 July 2025 – which is to say today – as well as providing for the plaintiffs to file and serve any further affidavits they may wish to rely on, and a brief outline of submissions by 9 July 2025. It was also ordered that the plaintiffs serve the orders on Mr Morella by 4 July 2025 in the manner provided for in the substituted service orders of 30 April 2025. There was service in accordance with those orders on 27 June 2025, which is to say that, on that day, Mr Morella was notified that default judgment would be sought against the three defendants on 18 July 2025. He was thus given three weeks’ notice – as was his solicitor, Mr Mattiussi.

26    On 9 July 2025, the plaintiffs’ solicitors emailed their further affidavit supporting default judgment, and their submissions, to Mr Morella and Mr Mattiussi. It was then only on 16 July 2025, which is to say two days ago, in the late afternoon, that, for the first time, the defendants came on the record. That was by Mr Mattiussi writing to the plaintiffs’ solicitors via email. He said that he was instructed to file notices of acting for each of the defendants in the proceeding. He set out proposed orders, which would have had the default hearing vacated, the plaintiffs’ file and serve a statement of claim, and the matter being brought back for case management thereafter.

27    The following day, 17 July 2025, Mr Mattiussi filed a notice of acting on behalf of all of the defendants. Today, when the matter was called, Mr Mattiussi appeared, provided an affidavit by him and applied for the adjournment that I have already described.

28    Mr Mattiussi’s affidavit supporting the adjournment does not, in terms, explain why the defendants did not file addresses for service at an earlier time, or appear at the case management hearing on 27 June, or otherwise take steps to defend the proceeding. However, the affidavit sets out some details with respect to ongoing negotiations, or efforts, to try and settle the claims, starting with the report to creditors of 13 June 2024 that I have already referred to. It says that, since late May 2025, Mr Mattiussi’s dealings with the plaintiffs and their solicitor have been limited to, and focused on, resolving the various claims against the defendants. He refers to an informal settlement conference on 10 June 2025, and states that, since then, the plaintiffs have exchanged without prejudice communications and offers to resolve the proceeding. He then says that he has recently been on leave, and only returned to the office on 15 July 2025, and states:

Given the stalled settlement negotiations, my retainer was broadened, and I am now instructed to act for the defendants in these proceedings. Absent an early settlement for commercially expedient reasons (on a without admissions basis) I am instructed that the defendants intend to defend all claims in these proceedings.

29    The affidavit goes on to deal with the claims, but I will return to that aspect shortly.

30    The evidence of the plaintiffs’ solicitor, Mr Hill, establishes that between 20 May 2025 and 26 June 2025 (ie the day before the first case management hearing) there were five telephone conversations between him and Mr Mattiussi in relation to the proceeding and liquidation of the company, as well as 12 emails and one meeting. Also, the defendants have been continuously represented in relation to the claims by different solicitors and insolvency practitioners from April 2023 to the present. In those circumstances, I infer that the defendants are well aware of the details of the claims against them and that if there are any viable defences to those claims they would be well-known to the defendants.

31    Taken against that background, I consider that the defendants’ default is very serious. They have had detailed notice of the claims made against them for a very long time, and they have had notice of the proceeding itself since shortly after it was filed. Mr Morella patently avoided service for a long time and was eventually properly served pursuant to orders for substituted service. Even then, he did nothing to defend the claim. Even after being notified of the default judgment hearing, he did nothing for several weeks. The explanation offered on his behalf from the bar table is that he was focused on trying to settle the claim, but that is no explanation for not dealing with the proceeding. Once the liquidator started the proceeding and progressed it, it should have been obvious that the proceeding could not be ignored.

32    Mr Morella elected to ignore the proceeding or not deal with it in any way. He deliberately chose not to file an appearance or appear. I infer that the defendants have simply cocked a snook at the Court. They have treated the Court, the processes of the Court and the liquidator, the Court’s officer, with contempt in the manner in which they have approached the proceeding.

33    Nevertheless, they are here today, which directs attention to what defence or evidence they may have to oppose the claims that are brought in the proceeding. I see that as particularly relevant because if there is an arguable defence, then, notwithstanding their default, they should probably have the opportunity to put it on given the finality of orders that would otherwise be made. Similarly, if there is no apparent basis for any defence to the claims, it would simply be a waste of everyone’s effort, including their own, to put the matter off.

34    I have documented the history, since December 2022, of the liquidator’s efforts to get an engagement from Mr Morella with the substance of the claims. Not once in the documented record have the defendants set up any reason for why the claims are not good other than the email of Mr Williams back in January 2023, which I have extracted above. That email was a long time ago, lacks pertinent detail and is unsubstantiated. To seek to rely on it now, in isolation and some two and a half years later, is a particularly weak and unpersuasive basis to advance a defence.

35    Turning back to Mr Mattiussi’s affidavit, he says that in respect of the loan account claim, he is instructed that the accuracy of the company’s books and records “has been in issue for some time”, and then he annexes Mr Williams’ 10 January 2023 email. There is not even a statement there (not even on information and belief) to say that Mr Morella repaid the loan, or repaid parts of it, or disputes individual ledger items, or has some other basis to resist the loan account claim. He merely says, as indicated, that there has been an issue with regard to the accuracy of the books. When one has regard to the ledger entries, many of them are patently for personal items and not for company expenses. None of that is explained in any way.

36    The affidavit goes on to say that, in respect of the business sale claim against the second defendant, Mr Mattiussi is instructed “that there were various relevant pre-appointment dealings with Mr Kazar that need to be addressed as part of a defence”. That is very opaque. It does not present any basis for a discernible defence.

37    The affidavit then says, “In respect of the preference payments, I am instructed there needs to be a proper interrogation of the underlying assertion as to the company’s insolvency at the relevant times.” That does not in any way answer the claims against the third defendant, in particular given that under s 588FDA of the Corporations Act does not require the establishment of insolvency. In any event, the statement is entirely opaque, and lacks any positive assertion that the company was solvent at the relevant times. Mr Morella was the sole director and secretary of the company. If anyone, he should be able to positively deal with the question of insolvency.

38    The affidavit goes on to deal with an alleged insolvent trading claim, but that is not pressed, so I do not need to deal with it. The affidavit also says, though, that given “the complexity of the allegations in the proceedings and the various underlying factual disputes, the defendants are of the view that it is appropriate for the proceedings to be advanced by way of pleadings.” But no underlying factual disputes are identified. Indeed, the defendants advance no pertinent facts at all, not even by way of assertion let alone evidence.

39    It is also not clear that there is any particular complexity. Some emphasis was placed, during submissions, on the report to creditors and, in particular, the liquidator’s recommendation to settle the claims, and the creditors’ acceptance of that recommendation. It seemed to be submitted that the accepted compromise of the claims for a sum of $1.25m against their claimed quantum of a little more than $3m casts some doubt on their strength. However, analysis of the reasons given by the liquidator, as I have set out above, do not reveal that the liquidator had any misgivings about the strength of the claims; the reasons for the compromise related to the question of recoverability on any judgment. Mr Mattiussi draws attention to the liquidator having referred to settlement avoiding “the inherent uncertainty associated with litigation.” But, of course, all litigation has inherent uncertainty, including, in particular, time and cost, and not necessarily any misgivings about how strong the claims are.

40    Against that, the liquidator has put on substantial evidence supporting the claims. The default judgment application has not been put on simply on the basis of the court accepting the pleaded facts. It is put far higher than that. There is positive evidence supporting each of the claims.

41    As such, as it stands, I have a situation before me where the default is serious, and there is no apparent defence. Beyond what I have identified above, Mr Mattiussi has not even been able to identify the nature of the further evidence that the defendants might file to supplement their application for an adjournment, and no request was made to stand the matter down until, say, the afternoon, to enquire further into those matters.

42    Moving on then to consider prejudice, I accept that to refuse the adjournment and to move on and deal with default judgment, will lead to final judgment and, therefore, substantial prejudice to the defendants. Of course, if indeed they do not have a meaningful defence, then that prejudice is heavily discounted.

43    For the plaintiffs, any further delay will be prejudicial. It is not particularly significant if the matter was otherwise able to be brought to finalisation reasonably quickly, save for one consideration. That is the evidence the plaintiffs have adduced to the effect that, in May 2023, Mr Morella gave an undertaking that he would not sell, dispose, transfer, deal with, encumber or otherwise diminish the value of certain assets without the written consent of Mr Kazar. The assets were then identified as including a property in the ACT. The evidence is that, on or about 23 April 2025, a discharge of mortgage and a new mortgage were lodged in relation to that property. The plaintiffs had not consented to that dealing. That gives some foundation to the plaintiffs’ concern with regard to a possible dissipation of assets if there is further delay. Of course, delay in resolving these matters is prejudice also to creditors and in the winding up of the company. There is also the prejudice to the Court and other litigants in the Court, so pertinently identified in Aon.

44    Stepping back and having consideration of the defendants’ conduct from December 2022 and thereafter, I am left to draw the inevitable inference, particularly in the absence of any indicated basis for a defence, that the adjournment which is sought today is merely a further attempt to delay the inevitable, perhaps as a ploy to strengthen the defendant’s negotiating position. I am not persuaded that it is justified, not even to give the defendants a further opportunity to put on evidence revealing what their defence might be.

45    In those circumstances, I dismiss the defendants’ application for an adjournment, and move on to deal with the default judgment application.

46    In that regard, in Chamberlain Group, Incorporated v Giant Alarm Systems Co, Limited (No. 2) [2019] FCA 1606, Yates J summarised the principles relevant to the granting of default judgment with reference to FCR r 5.23 (at [13]-[14]):

[13]     The power to give judgment against a defaulting party is undoubtedly discretionary. The discretion must be exercised cautiously. Where the defaulting party is a respondent to a pleaded claim, the giving of judgment for final relief on the application will deliver complete success to the applicant without investigation of the merits of the pleaded claim: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27]. There is no requirement that the act or acts of default be intentional or amount to contumelious conduct. There is no requirement that the act or acts of default result in inordinate or inexcusable delay. That said, such features, if present, will be relevant to the exercise of the Court’s discretion. So too will conduct that persuades the Court that the defaulting party is manifesting an inability or unwillingness to cooperate with the Court and the other party or parties to the proceeding.

14     Rule 5.23(2)(c) requires the Court to be satisfied that the applicant is entitled to the relief claimed in the statement of claim. This requirement has been interpreted as meaning that the Court must be satisfied that “on the face of the statement of claim” the applicant is entitled to the relief that is claimed. It is not a requirement that the applicant prove its claim by way of evidence. Put another way, the facts alleged in the statement of claim are taken to have been admitted: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42]. If, on inspection of the statement of claim, the Court is satisfied that the applicant would be entitled to the relief sought then this requirement of r 5.23(2)(c) will be met: CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 at [18] – [19]; Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23]. The Court may permit further evidence to be adduced, but not evidence that would alter the pleaded case: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665 at [45], [48] – [50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42] – [44]; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; 195 FCR 1 at [62] – [63].

See further EV20 Consulting Group Pty Ltd v Paperless Warehousing Pty Ltd [2025] FCA 328 at [14] per Burley J; Hugo Boss AG v Hardge [2024] FCA 1325 at [20] per Neskovcin J.

47    I have already identified the relevant defaults, which means that the power to grant default judgment under FCR r 5.23 is enlivened. In particular, I rely on the default by the defendants in failing to “defend the proceeding with due diligence”. Not appearing at the case management hearing on 27 June 2025 is one thing, but to fail to file an appearance until the day before the default hearing and then at the default hearing to fail to identify any reasonably arguable or viable defence is to fail to defend the proceeding with due diligence. Indeed, as mentioned, it gives rise to the inference that there is no such defence.

48    Turning to the loan account debt, this is a pure debt claim and falls within the scope of FCR r 5.23(2)(b). The entries in the suspense/queries account that I have referred to were then also allocated to the loan account, as Mr Kazar had indicated he would do in his correspondence to Mr Morella. That explains the increase of the loan account from the amount reflected in the correspondence to the amount that is now sought.

49    Insofar as the sale of business at under value claim is concerned, as indicated, the business of the company was sold by it to the second defendant, being another company controlled by Mr Morella, for consideration of $166,000. The liquidator has obtained valuations that suggest the correct value of the business at the time of sale was between a high valuation of $1,245,507 and a low valuation of $690,467. The plaintiffs have appropriately (for a default judgment application) adopted the figure that is most favourable to the defendants, namely, the lower figure of $690,467. Deducting the $166,000 consideration paid, that results in a sale at an undervalue of $524,467.

50    As against Mr Morella the claim is asserted as a breach of the statutory and fiduciary duties which are identified in the concise statement. Usually, such a claim would measure in statutory or equitable compensation. I am satisfied, in the present circumstances, that it is appropriate to quantify that compensation in the sum of $524,467 calculated in the way indicated above.

51    As against the second defendant, the claim is put on various bases as an uncommercial transaction pursuant to s 588FB of the Corporations Act, an unreasonable director-related transaction pursuant to s 588FDA, and a creditor-defeating disposition pursuant to s 588FDB. I am satisfied, on the facts pleaded, and the evidence presented, that the business sale transaction is voidable on each of those bases. The remedy that the plaintiffs seek is an order pursuant to s 588FF(1)(c), that the second defendant:

... pay an amount that, in the court’s opinion, fairly represents some or all of the benefits that the second defendant has received because of the business sale.

52    Based on the calculation referred to above, I am satisfied that that amount is $524,467.

53    Turning now to the preference payments to the third defendant, the facts are set out in the concise statement and supported by the evidence. Once again, in relation to Mr Morella, that is a claim for breach of duties. The payments are also preferences in favour of the third defendant to be recovered by order pursuant to s 588FF(1)(a). I am satisfied that there should be judgment against the first and third defendants in the sum of $145,000 on a joint and several basis in relation to this aspect of the claim.

54    The plaintiffs have provided schedules of pre-judgment interest calculations. I am satisfied with reference to Stone v Mizzi (No 2) [2024] FCA 927 at [15]-[24] per Halley J and the authorities referred to, that the applicable time for interest to begin to run on those claims is when demand was made. That is the basis on which the interest calculations have been done.

55    I will therefore make orders substantially in the form sought by the plaintiffs.

Associate:

Dated:    22 July 2025