Federal Court of Australia

Aviva Holdings Pty Ltd (in liquidation) v Arora [2026] FCA 716

ORDERS

THE COURT DECLARES THAT:

1.    The respondent has contravened s 588G(2) of the Corporations Act 2001 (Cth) in relation to the incurring of various debts by Aviva Holdings Pty Ltd (in liquidation) (the company) totalling $370,076.21.

2.    The respondent is separately indebted to the company in the sum of $747,558.58.

AND THE COURT ORDERS THAT:

3.    Pursuant to s 588M of the Act, the respondent pay to the applicants the sum of $370,076.21 together with interest on the said sum to the date of this order amounting to $20,265.

4.    In addition to order 3, the respondent pay to the applicants the sum of $747,558.58 in respect of his separate indebtedness to the company, together with interest on the said sum to the date of this order amounting to $40,937.

5.    The respondent pay the applicants’ costs of and incidental to this proceeding.

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

REASONS FOR JUDGMENT

(delivered ex tempore)

BEACH J:

1    The applicants have commenced this proceeding against a former director of the first applicant, Aviva Holdings Pty Ltd (in liquidation), alleging that he contravened s 588G(2) of the Corporations Act 2001 (Cth) in relation to various debts. The applicants seek an order pursuant to s 588M that the respondent pay to the applicants the sum of $370,076.21, and an order that the respondent separately pay the sum of $747,558.58 to Aviva Holdings in respect of his separate indebtedness. Let me address the insolvent trading claim first and identify the relevant statutory provisions.

2    Section 588G of the Act provides:

588G    Director’s duty to prevent insolvent trading by company

(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.

…

3    Section 588E(4) provides:

588E    Presumptions to be made in recovery proceedings

…

(4)    Subject to subsections (5) to (7), if it is proved that the company:

(a)    has failed to keep financial records in relation to a period as required by subsection 286(1); or

(b)    has failed to retain financial records in relation to a period for the 7 years required by subsection 286(2);

the company is to be presumed to have been insolvent throughout the period.

4    The present proceeding is a “recovery proceeding” (s 588E(1)(e)) such that by operation of s 588E(2), s 588E(4) can be invoked.

5    Section 286(1) relevantly provides:

286    Obligation to keep financial records

(1)    A company, registered scheme, registrable superannuation entity or disclosing entity must keep written financial records that:

(a)    correctly record and explain its transactions and financial position and performance; and

(b)    would enable true and fair financial statements to be prepared and audited.

…

6    I do not need to linger on the definition of “financial records” in s 9 for present purposes. Its amplitude embraces the subject matter of what is absent or inadequate in the present context.

7    Section 588M provides:

588M     Recovery of compensation for loss resulting from insolvent trading

(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.

(3)    The creditor may, as provided in Subdivision B but not otherwise, recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage.

(4)    Proceedings under this section may only be begun within 6 years after the beginning of the winding up.

8    Now the respondent was the sole director of Aviva Holdings from its incorporation on 29 April 2021 until it was placed into liquidation on 13 March 2025 (the relevant period).

9    The evidence before me establishes that during the relevant period Aviva Holdings failed to keep written financial records as required by s 286(1) that correctly recorded and explained its transactions, financial position and performance and enabled true and fair financial statements to be prepared and audited. So, it can be presumed under s 588E(4) that Aviva Holdings was insolvent throughout the relevant period.

10    Now from at least 31 December 2022, unsecured debts due to various creditors were progressively incurred by Aviva Holdings and remained unpaid, which amounts include:

11    Moreover, when each of these unsecured debts was incurred, Aviva Holdings did not have adequate cash in its bank accounts to pay creditors as and when the debts fell due such that the liabilities of Aviva Holdings increased progressively from 31 December 2022 and at every six-monthly interval thereafter.

12    Between 31 December 2022 and 13 March 2025 when Aviva Holdings was placed in liquidation, its cash at bank deficiency in respect to unsecured debts progressively increased and ranged between $42,959.70 and $451,747.

13    The evidence establishes that the unsecured creditors of Aviva Holdings have suffered loss and damage. Aviva Holdings has no assets save for the debt owing by the respondent reflected in the respondent’s loan account with Aviva Holdings.

14    On the evidence adduced before me there were reasonable grounds, from the matters referred to above, for suspecting that Aviva Holdings was insolvent when each of the unsecured debts set out above were incurred. The respondent was likely aware at the time that each of the unsecured debts were incurred that there were grounds for suspecting that Aviva Holdings was insolvent, alternatively, a reasonable person in a like position in Aviva Holdings would have been so aware.

15    The respondent has not filed any material opposing the application for an order in respect of the insolvent trading of Aviva Holdings.

16    Accordingly, I will make the declaration sought by the applicants as to the contravention of s 588G(2) and order that the respondent pay the applicants the sum of $370,076.21 pursuant to s 588M, together with pre-judgment interest calculated as amounting to $20,265.

17    Let me deal with the separate claim concerning the respondent’s separate indebtedness to Aviva Holdings in the sum of $747,558.58.

18    I have been provided with a copy of Aviva Holdings’ accounting entries for director loans for the period 27 August 2021 to 21 October 2024, which commenced with a balance of $0.00 on 27 August 2021. The general ledger account “Director Loan” code 2-1550, “Andy Loan” code 2-1556 and “Director’s Withdrawal” code 3-300 record for the period just referred to a total for debits of $1,800,682.10 and a total for credits of $1,053,123.52, being a debit surplus of director’s loans and a net indebtedness to Aviva Holdings of $747,558.58; the respondent sometimes went under the name of “Andy”. A random check of 18 transactions which appear in Aviva Holdings’ Westpac bank statements and Aviva Holdings’ CBA bank statements are recorded as the same date and in the same amount as in the accounting entries.

19    The respondent was served with a notice to admit on 22 April 2026 which sought an admission of the fact that “The Respondent is indebted to [Aviva Holdings] in the sum of $747,558.58.” The respondent did not serve a notice of dispute within the relevant time frame. Further, the respondent has not filed any material opposing the application for an order in respect of his separate indebtedness to Aviva Holdings.

20    In my view on the material before me the respondent is indebted to Aviva Holdings in the sum of $747,558.58, together with pre-judgment interest calculated as amounting to $40,937.

21    I will enter judgment against the respondent and make the necessary orders to reflect these reasons.

Associate:

Dated:    9 June 2026