Federal Court of Australia

ACN 603 710 274 Pty Ltd (in liq) formerly known as Klyp Australia Pty Ltd v Nabi [2026] FCA 1032

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 5.23(2) of the Federal Court Rules 2011 (Cth), judgment be given for the plaintiffs in the sum of $4,024,511.51, being:

(a)    $1,596,433.75, as a debt, due and owing to the first plaintiff; and

(b)    $2,428,077.76, pursuant to s 588M(2) of the Corporations Act 2001 (Cth).

2.    The defendant pay the plaintiffs the sum of $4,615,978.34, being the amount the Defendant has been ordered to pay pursuant to Order 1, plus pre-judgment interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth) on that sum from 14 September 2024 to 15 July 2026, being $591,466.83.

3.    The defendant pay the plaintiffs’ costs on the standard basis to be taxed or agreed.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    This is an application for default judgment brought by the plaintiffs, a company in liquidation and its liquidator, against the former director of the company, Mr Gawad Nabi. Mr Nabi has been served and given ample notice of these proceedings. Indeed, he appears to be represented by a solicitor, who was also informed of the proceedings, though, unusually, no response has been received by the plaintiffs from that solicitor. To date, Mr Nabi has failed to file a notice of address for service or a defence, and has not appeared at any of the earlier directions hearings.

2    For the reasons which follow, Mr Nabi is clearly in default and judgment should be given against him.

Background

3    The proceedings were commenced on 1 April 2026, by an originating process and statement of claim.

4    On 10 April 2026, Mr Nabi was ordered to file a defence by 8 May 2026.

5    Some issues arose as to service of the originating process and statement of claim on Mr Nabi. Consequently, the plaintiffs sought and obtained orders on 18 May 2026 that those documents be taken to have been served on him by no later than 10 April 2026, by reason of their being sent to him via email and to his solicitor, Mr Matthew Poon of Sambi Legal.

6    Those orders also extended the time by which Mr Nabi was to file a defence to 15 June 2026.

7    No defence was filed, and consequently, on 10 July 2026, the plaintiffs filed for default judgment.

Principles governing default judgment

8    There is no doubt that Mr Nabi has committed an act of default under r 5.22(2)(b) and (c) of the Federal Court Rules 2011 (Cth) (Rules), in that he has failed to comply with an order of the Court to file a defence and has failed to attend hearings in the proceedings. This enlivens the Court’s discretionary power to grant judgment in default under r 5.23 of the Rules.

9    The principles relevant to the Court’s power to grant default judgment are set out in the careful written submissions provided by the solicitor for the plaintiffs, Mr Alexander, and they are adopted here as follows:

    Where a respondent is in default, an applicant may apply for judgment for the relief claimed in the statement of claim “to which the Court is satisfied that the applicant is entitled”: r 5.23(2)(c) of the Rules. Where the claim is for a debt or liquidated damages, the applicant may also apply for judgment for the debt, together with interest and costs: r 5.23(2)(b).

    On such an application, the Court does not require proof by evidence of every fact. The pleaded allegations of fact in the statement of claim are taken to be admitted by reason of the default, and the question for the Court is whether, on the face of the statement of claim, the applicant is entitled to the relief sought: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513, 523 – 524 [42]; Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 [21].

    To that end, the relevant inquiry is whether each element of the cause of action giving rise to the relief sought is properly and discretely pleaded in the statement of claim: Chamberlain Group, Inc v Giant Alarm System Co Ltd (No 2) [2019] FCA 1606 [13] – [14]. Of course, the Court retains a discretion, but where the pleading discloses an entitlement and the respondent has chosen not to participate, judgment will ordinarily follow.

10    In this case, the statement of claim seeks two different forms of relief. The first is in relation to a debt, while the second is in relation to insolvent trading.

Claim for debt

11    The debt claim arises by reason of the company’s accounts, which were maintained in the Xero accounting platform. They disclose a loan account in the name of Mr Nabi, the heading being “Loan – G Nabi”. At the time of the liquidation, the account recorded Mr Nabi as owing $1,596,433.75 to the company. It appears from the liquidator’s investigations that the balance comprises payments made by the company to Mr Nabi, and payments due to the company from debtors that were redirected by Mr Nabi to himself.

12    Though there is no written contract, service agreement or invoice containing the terms of any loan arrangement between the parties, it is relevant that the account kept in Xero was recorded as reflecting a “loan”. It was also recorded as a non-current asset in the company’s financial statements as at 30 June 2023. These records constitute prima facie evidence of the existence of the debt, pursuant to s 1305 of the Corporations Act 2001 (Cth) (Corporations Act). In any event, the allegations in the statement of claim as to the existence and balance of the loan account are taken to have been admitted by reason of Mr Nabi’s default.

13    The liquidator made a demand for repayment of the balance of the loan on 16 September 2025, but it remains unpaid. In those circumstances, it is appropriate that the plaintiffs obtain judgment for the amount of the debt as an amount due and owing to the company in liquidation.

Claim in relation to insolvent trading

14    The second claim concerns alleged insolvent trading. The liquidator brings this claim under s 588M of the Corporations Act, which provides that a 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 suffered by creditors by reason of the company’s trading while insolvent.

15    The circumstances in which a company trades insolvent are set out in s 588G of the Corporations Act, which relevantly provides as follows:

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.

16    The plaintiffs have pleaded the following facts in support of the insolvent trading allegation:

(1)    Mr Nabi was the director of the company at all relevant times.

(2)    The company was insolvent, within the meaning of s 95A of the Corporations Act, from on or about 26 November 2020 and remained so thereafter.

(3)    From 26 November 2020 to 13 September 2024, the latter being the date on which the company entered liquidation, the company incurred debts in the amount of $2,428,077.76, which remain unpaid, comprising:

(a)    $1,728,805.55 to the Australian Taxation Office;

(b)    $541,240.58 for outstanding superannuation charge liabilities; and

(c)    $158,031.63 for other trade creditors and statutory creditors.

(4)    At the time that each of the respective debts was incurred by the company, there were reasonable grounds for suspecting insolvency which were known or ought to have been known to Mr Nabi as the director, and of which a reasonable person in a like position would have been aware.

(5)    Mr Nabi failed to prevent the company from incurring the debts.

(6)    The creditors have suffered loss or damage equal to the total of the debt.

17    Again, by reason of Mr Nabi’s default, these allegations are taken to have been admitted.

18    However, for completeness, the liquidator has adduced evidence as to the fact of insolvency and prepared a detailed solvency report. There, he expresses the opinion that the company was insolvent from at least 26 November 2020. That opinion is well-supported by the fact that: firstly, the company suffered an operating loss of $554,383 in the financial year ending 30 June 2021; second, there was a crystallisation of, and failure to pay, accumulating liabilities due to the Deputy Commissioner of Taxation which, as at 26 November 2020, totalled $419,020; third, the company ceased monthly payments to the Deputy Commissioner of Taxation after October 2020; and fourth, the company had negligible cash at bank.

19    Further, the Australian Taxation Office assessment regarding the company’s superannuation guarantee obligations, which resulted in an assessment of $155,715.61, is important in the context of determining insolvency. The failure to comply with that statutory duty is, arguably, a very clear indicator of a company’s inability to pay its debts. Once a company ceases to comply with its obligations to pay statutory amounts due to its employees, the concept of insolvency is almost assured. Nothing further need be said on that point.

20    Finally, it is also relevant that a creditor’s statutory demand was issued on 23 May 2024 for $2,545,772.67, which obviously was unpaid.

21    In all those circumstances, clearly the company was insolvent at the relevant times when the debts were incurred and the plaintiffs’ entitlement to judgment for that amount is established. In the result, the liquidator is entitled to recover the sum of $2,428,077.76 from Mr Nabi as a debt due to the company.

Interest

22    The plaintiffs seek pre-judgment interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) on the judgment sum of $4,024,511.51. They seek that from 14 September 2024, being the day after the liquidator’s appointment, to 15 July 2026. Interest has been calculated in accordance with the rates in the Court’s Interest on Judgments Practice Note (GPN-INT), which are the cash rates published by the Reserve Bank of Australia plus 4 per cent for each half-year period. The calculations identify that an amount of $591,466.83 is due and owing as of 15 July 2026 for pre-judgment interest, and there should be judgment for that amount.

Costs

23    Mr Alexander, on behalf of his client, seeks costs on an indemnity basis. However, in this case there does not appear to be sufficient evidence to reach the conclusion that such an order should be made.

24    It is true, as Mr Alexander has submitted, that the defendants have paid no regard to the proceedings and have largely ignored them. That, however, does not itself reach the level of conduct required for an indemnity costs order to be made. That being so, costs will be ordered on the standard basis, to be taxed or agreed.

Note

25    These are the amended and revised reasons for judgment given on 15 July 2026. Whilst the reasons given above refine and develop those that were delivered ex tempore, the substance of what was said that day has not been changed nor has any other material change been made.

Associate:    

Dated:    30 July 2026