ASIC v Plymin - Lecture notes 7 PDF

Preview

Summary

Probably...

Description

ASIC v Plymin [2003] VSC 123 FACTS Elliott argued that he relied on information about the company’s financial position provided to him by its managing director, Plymin, and the company’s management. As such, Elliot felt that he was entitled to raise the defence under s.588H(3) for insolvent trading

ISSUE A director must establish, under a defence in s 588H(3), that at the time when the debt was incurred, the director had reasonable grounds to believe, and did believe, that a competent and reliable person was responsible for providing the director with adequate information about whether the company was solvent and that the other person was fulfilling that responsibility.

COURT RULING The court held that Elliott, a non-executive director, could not rely on this defence under s 588H(3). The court was not satisfied that Elliott believed that Plymin and the management were competent and reliable persons who were fulfilling the responsibility to provide him with adequate information about whether the company was solvent. The court held that a reasonable person would not have regarded that Plymin and the management were competent and reliable persons who were fulfilling their responsibilities, including that of providing adequate information about the company’s solvency. The evidence disclosed that Plymin did not comply with board requirements for financial information. The court was not satisfied that Elliott, an experienced businessman and an astute intelligent individual, did not know that he could and should have obtained from management regular lists of debtors and creditors by age and amount, regular profit and loss and cash flow statements and reports on negotiation with creditors whose debts were outside trading terms. The court thought that Elliott turned a blind eye to the details of the company’s liquidity crisis in the hope that “something would turn up”....