Kenna & Brown P/L v Kenna & Ors [1999] NSWSC 533

Reported Decision : (1999) 32 ACSR 430 (1999) 17 ACLC 1183

New South Wales Supreme Court CITATION : Kenna & Brown P/L v Kenna & Ors [1999] NSWSC 533 revised - 13/07/99 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 4081/1995 HEARING DATE(S) : 06/04/99 - 09/04/1999 JUDGMENT DATE : 2 June 1999

KENNA & BROWN PTY LTD (IN LIQUIDATION) & DANIEL IVAN CVITANOVIC (Plaintiffs) PARTIES : LANCE ERIC KENNA, PATRICIA ELLEN KENNA & ERNEST BROWN (Defendants)

JUDGMENT OF : Bergin J at 1

Mr J Thomson (Plaintiffs) COUNSEL : Mr C Newlinds (Second Defendant) Mr D Robinson & Mr J Conomy (Third Defendant) Gordon & Johnstone (Plaintiffs) Official Trustee in Bankruptcy - (First Defendant) Ms S Nash SOLICITORS : Kemp Strang Lawyers (Second Defendants) Cunich Lawyers (Third Defendant)

CATCHWORDS : Company directors - breach of fiduciary duty - misapplication of company funds for director's personal use - failure to maintain proper financial records.; Division of duties - Co-director not involved in financial management - reliance on others - reasonableness of conduct in all the circumstances.; Employee of company - whether fiduciary duty owed - moulding of duty to circumstances - breach of fiduciary duty: false entries in company financial records - knowledge of misapplication of company monies for personal benefit of director and employee - failure to inform company.; Presumption of Insolvency of corporation; s588E(4) of the Corporations Law; breaches of s289; failure to keep accurate records; false entries in records of a corporation.; Insolvent trading: Insolvency - S95A of the Corporations Law. Ss588G 588M of the Corporations Law - whether reasonable grounds for suspecting insolvency - reasonable grounds to be determined by objective assessment in context of director's compliance with statutory duties.; S588G - imposition of duty on director.; S588H defences and application of s1318 relevance of s1317JA - pre-requisite of honesty - reasonableness of director's conduct in consideration of whether director should be excused from liability. ACTS CITED : Corporations Law: s95A, s289, s588E(4), s588G, s588H(2) & (3), s588M,s1317JA, s1318 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 Sandell v Porter (1966) 115 CLR 666 Taylor v Australian and New Zealand Banking Group Ltd (1988) 6 ACLC 808 Hamilton v BHP Steel (JLA) Pty Ltd (1993) 13 ACLC 1548 Melbase Corp Pty Ltd v Segenhoe Ltd (1995) 13 ACLC 823 Re New World Alliance Pty Ltd (Receiver and Manager appointed); Sycotex Pty Ltd v Baseler (1994) 51 FCR 425 Standard Chartered Bank v Antico (nos 1 & 2) (1995) 38 NSWLR 290 Commonwealth Bank of Australia v Friedrich (1991) 9 ACLC 946 Southern Star Group v Byron (1995) 13 ACLC 1622 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 13 ACLC 1572 CASES CITED : Daniels v Anderson (1995) 37 NSWLR 438 Advance Bank Australia Limited & Ors v FAI Insurance Ltd & Anor (1987) 5 ACLC 716 Circle Petroleum (Qld) v Greenslade (1998) 16 ACLC 1577 Robb v Green [1895] 2 QB 315 Blyth Chemicals v Bushnell (1933) 49 CLR 66 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Colour Control Centre Pty Ltd v Ty (Santow J, Supreme Court of NSW, 24 July 1995, unreported). Barnes v Addy (1874) LR 9 Ch App 244 Royal Brunei Airlines v Tan (1995) 2 AC 378 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) (1999) 73 ALJR 306 Furs Ltd v Tomkies (1936) 154 CLR 583 Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722 DECISION : Breaches of s588G by 1st and 3rd defendants; ; Breaches of fiduciary duties by 1st and 2nd defendants