In the matter of Substance Technologies Pty Ltd [2019] NSWSC 612

Here, a liquidator chased directors for debts incurred by a company. 

The liquidator said the debts were incurred while the company was insolvent. The Court accepted that: [64].  

The directors were a father and son. Dad retired as a director more or less simultaneously with son’s appointment.  The debts were incurred while Dad was a director, and before the son’s appointment. 

The quantum of the debts increased over time as interest accrued on both.  This gave rise to the question: should Dad be liable for interest accrued after his retirement?: [68].  While there was a suggestion that Dad should be liable for post-retirement interest because the ‘die was cast’ when he incurred the debts ([70]) the Court took the alternative approach.  

First, it found the continuing day-to-day failure to pay the debt rather than the debt itself gave rise to the accruing interest: [71]. Second, holding the son solely liable was consistent with an incoming director’s duty to immediately familiarise themselves with the company’s position and act to stop insolvent trading: [72] and [73].  

Good fun!