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GTL Hypotheticals #2

QUESTION

Does a Liquidator need to show that a cause of action against a person probably exists in order to summon a person to attend an examination and produce certain documents?

ANSWER

Section 596B of the Corporations Act 2001 (Cth) (the Act) allows a person to be summoned for an examination that may be able to give information about examinable affairs of the corporation to determine:

  1. whether there is evidence available to support a claim by the company against the person; and

  2. the person’s ability to satisfy a potential judgment against them.

In the case of Pitman v Park (Liquidator), in the matter of BAM Recycling Pty Ltd (in liq) [2020] FCA 887, it was clarified that Liquidators seeking information from potential defendants only need to show that a cause of action possibly exists (not that it probably exists).

If a cause of action possibly exists, the potential defendant and their financial status can be examined.  

Please see the case here – https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca0887

Please see the following reference here - https://corrs.com.au/insights/federal-court-provides-guidance-on-tools-for-liquidators-investigating-potential-claims


CONTACT our office on - 02 9922 4111 - if you wish to discuss any matters relating to insolvency litigation.

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