JUDGMENT No. on20 tp 24 NOT FOR DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) ) No NG 464 of 1993 GENERAL DIVISION ) BETWEEN: RED LEA CHICKENS PTY LIMITED (ACN: 002 156 569) Applicant AND: THEO KAPOS First Respondent CHRISANTHI KAPOS Second Respondent CORAM: Lindgren J PLACE: Sydney DATE: 21 November 1994 MINUTES OF ORDERS 13 DEC 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL THE COURT ORDERS THAT: 1. There be judgment for the applicant against both respondents in the sum of $194,411.75. 2. There be judgment for the applicant against the first respondent in the sum of $354,391.37. 3. The respondents pay the applicant's costs. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. NOT FOR DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) ) No NG 464 of 1993 GENERAL DIVISION ) BETWEEN: RED LEA CHICKENS PTY LIMITED (ACN: 002 156 569) Applicant AND: THEO KAPOS First Respondent CHRISANTHI KAPOS Second Respondent CORAM: Lindgren J PLACE: Sydney DATE: 21 November 1994 REASONS FOR JUDGMENT In this matter the applicant seeks judgment against the respondents who were, at all relevant times, directors of a company named Tasty Chickens Pty Limited (to which I shall refer as "the Company") on a cause of action provided for in s 592 of the Corporations Law ("the Law"). The respondents were previously represented in these proceedings by Messrs White Murray and Carew, but a notice of ceasing to act was filed on 18 November 1994. The proceedings were fixed for hearing today, Monday, 21 November 1994 at 10.15am. The respondents' names were called outside the Court and neither the respondents nor anyone on their behalf appeared. Apparently they have consulted another solicitor, who advised the solicitor for the applicant that neither he nor the respondents would be appearing, and that they were aware that the case was for hearing today and would be proceeding. The Company was wound up under the Law by order of the Supreme Court of New South Wales in its Equity Division, in proceedings No. E.D. 5865 of 1992, made and entered on 16 December 1992. The indebtedness of the Company to the applicant arises relevantly out of poultry sold and delivered by the applicant to the Company over a period from 4 July 1992 down to 23 October 1992. I do not say that this delimits the entirety of the period during which poultry was sold and delivered, but it is in respect of sales and deliveries during that period that the present claim is brought. In terms of s 592 of the Law it is clear on the evidence that the Company incurred indebtedness to the applicant before the commencement of Pt 5.7B of the Law, that it is to say, prior to 23 June 1993. It is also clear that the Company was, at the time when the indebtedness was incurred, a company to which s 592 applied. The first respondent, Theo Kapos, was at all relevant times a director of the Company, but the second respondent, Chrisanthi Kapos, became a director on 5 September 1992 in the place of a former director. Thus, in respect of the period after 5 September 1992 there is at least a potential for joint and several liability of the directors, whereas in respect of the period prior to 5 September 1992 there is only a question of liability of the first respondent. The issue posed by s 592, so far as is relevant to this case, is whether it is established by the applicant that immediately prior to the time when each debt was incurred, either there were reasonable grounds to expect that the Company would not be able to pay all its debts as and when they became due, or there were reasonable grounds to expect that if the Company incurred the particular debt it would not be able to pay all its debts as and when they became due. It is unnecessary for me to give an account of the evidence which was read on the hearing today. Both affidavit evidence and documents tendered and admitted as exhibits were relied upon. They satisfy me that as at the dates referred to in paragraph 11 of the amended statement of claim filed on 15 December 1993, being dates of deliveries of poultry by the applicant to the Company during the period 4 July 1992 to 23 October 1992, there were reasonable grounds to expect that the Company would not be able to pay its debts as and when they became due, and as well to expect that if the Company incurred the respective debts referred to in paragraph 11, it would not be able to pay all its debts as and when they became due. Thus, I am satisfied that the conditions of liability of a person who was a director of the Company, at the respective times of the incurring of the debts referred to in paragraph 11, are satisfied. Although defences are provided for in sub- s 592(2) of the Law, those defences have not, of course, been made out on the hearing today which has been ex parte. I should note that the aggregate amount of the debts referred to in paragraph i1 of the amended statement of claim is $447,980.47. Mr Taylor of senior counsel for the applicant has provided, helpfully, a summary of the amount of indebtedness during the period when, relevantly, the first respondent alone was a director, that is to say, the period 4 July 1992 down to 5 September 1992, and the period after 5 September 1992 down to 23 October 1992, when the respondents were directors. Since the first respondent was a director of the Company throughout the whole of the relevant period, he is made liable by s 592 for the whole of the amount of $447,980.47 and as well will be liable for interest upon it. However, the way in which this is to be expressed is that there will be a joint and several liability of both respondents in respect of the period from 5 September 1992 to 23 October 1992, and a liability of the first respondent alone in respect of the period from 4 July 1992 to 5 September 1992. The amount of the debt for what I shall describe as the joint period, that is from 5 September 1992 to 23 October 1992, is $158,695.48 and the amount of the debt for the earlier period from 4 July 1992 to 5 September 1992 is $289,284.52. There will be a judgment against both respondents for the sum of $158,695.48 plus interest, and there will be a judgment against the first respondent alone for the sum of $289,284.52 plus interest. I shall now refer to the question of interest. The amended application seeks interest pursuant to s 51A of the Federal Court of Australia Act 1976. I propose to order payment of interest on the amounts to which I have referred. The interest has been calculated only from 23 October 1992 down to the date of hearing, 21 November 1994. Strictly, the applicant would have been entitled to interest on each individual debt from the date of its being incurred down to the date of hearing but it seeks only to recover interest from, in effect, the closure of the indebtedness period, that is to say, 23 October 1992. For convenience, a copy of the calculations will be annexed to these reasons for judgment. The amount of interest on the joint and several debt of $158,695.48 from 23 October 1992 to date is $35,716.27 and the amount of interest on the indebtedness of the first respondent of $289,284.52 also from 23 October 1992 to date is $65,106.85. In the result there will be judgment for the applicant against both respondents for a sum of $158,695.48 plus interest of $35,716.27 under s 51A of the Federal Court Act 1976, making a total of $194,411.75. As well there will be a judgment for the applicant against the first respondent for a sum of $289,284.52 plus interest of $65,106.85, under that section making a total of $354,391.37. I order that the respondents pay the applicant's costs of the proceedings. Judgment may be entered forthwith. I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren. Associate: Mibu frag Dated: 12 December 1994 21 November 1994 Sydney 21 November 1994 Mr P W Taylor SC instructed by Carroll & O'Dea, Solicitors, appeared for the applicant. There were no appearances for the respondents. START END DAYS RATE INTEREST CUM INTEREST OUTSTANDING INTERES PER $ PER$ BALANCE 23-Oct-92 31-Aug-93 313 11.25% 0.0965 0.0965 158,695.48 15,309.77 01-Sep-93 31-Mar-94 212 10.50% 0.0610 0.1575 158,695.48 9,678.25 01-Apr-94 21-Nov-94 235 10.5% 0.0676 0.2251 158,695.48 10,728.25 TOTAL INTEREST 0.4790 35,716.27 TOTAL CLAIM 158,695.48 194,411.75 | — INTEREST IN ACCORDANCE WITH SCHEDULE J OF THE SUPREME COURT RULES AND PRACTICE NOTE 69 START END DAYS RATE INTEREST CUM INTEREST OUTSTANDING INTERES PER $ PER $ BALANCE 23-Oct-92 31-Aug-93 313 11.25% 0.0965 0.0965 289,284.52 17,642.39 19,556.43 -93 31-Mar-94 212 10.50% 0 0610 0.1575 289,284.52 21-Nov-94 289,284.52 01-Se TOTAL INTEREST 0.4790 65,106.85 TOTAL CLAIM 289,284.52 354,391.37 Mr Kapos Debt 289,284.52 158,695.48 447,980.00 Interest 65,106.85 35,716.27 100,823.12 Total 354,391.37 194,411.75 548,803.12 Mrs Kapos Debt 158,695.48 Interest 35,716.27 Total 194,411.75 C:\WP51\PERM\SUPCTINT.WK1