Background
Michael Berry was the sole director of GCGroup Pty Ltd from March 2013 until the company’s liquidation on 27 November 2024. Brendan Copeland, the appointed liquidator, commenced proceedings against Berry alleging that he caused the company to trade while insolvent in contravention of section 588G(2) of the Corporations Act 2001 (Cth), which imposes personal liability on directors for company debts incurred during insolvency.
Berry was properly served with the originating process on 27 April 2026 at Southport, Queensland, and notified of a case management hearing scheduled for 30 April 2026. Despite this and subsequent letters warning of default judgment proceedings, Berry failed to appear at the hearing, file a defence by the deadline of 28 May 2026, or engage with any court communications. On 2 June 2026, when personally served with a final notice, Berry stated to the process server: “Legal action is inevitable. I do not have any financial capacity to pay the matter.”
The Court’s Holding
Justice Jackman entered default judgment against Berry for $1,977,644.32, representing the debts incurred by the company during the period of insolvency, plus interest and costs. The court found that the statement of claim pleaded each element of the insolvent trading claim with sufficient particularity: that the company was presumed insolvent from November 2017 onwards (or alternatively was actually insolvent from 26 August 2019), that Berry was director throughout, that identifiable debts were incurred during insolvency, and that there were reasonable grounds for suspecting insolvency of which Berry was aware or should have been aware.
The court applied the principle that in default judgment applications, the pleaded facts are taken as admitted. Because those admitted facts established each element of liability under section 588G(2) of the Corporations Act, and because Berry’s failure to engage demonstrated an unwillingness to cooperate with the court, the discretionary power to grant default judgment was properly exercised. The court noted that while the power is discretionary and must be exercised cautiously, the defendant’s sustained non-compliance and repeated failure to respond despite proper notice and multiple opportunities weighed decisively in favour of judgment.
Key Takeaways
- Directors remain personally liable for company debts incurred during insolvency even where the company is later placed in liquidation, enforceable against the director personally.
- Default judgment in insolvent trading cases requires proper service and notice; the court will carefully track procedural compliance before entering judgment against an absent defendant.
- Where a defendant manifests unwillingness to cooperate by failing to appear, file defences, or respond to communications despite proper notice, courts will exercise their discretion to enter default judgment.
- The pleading must establish each element of the statutory claim; facts admitted by default must still disclose a complete cause of action.
Why It Matters
This judgment clarifies that liquidators can effectively pursue insolvent trading claims under section 588G against uncooperative directors through default judgment proceedings. The decision emphasises that proper service and procedural notice are prerequisites but that courts will not be deterred from granting judgment where defendants repeatedly fail to engage. For directors and their advisors, it underscores the serious consequences of ignoring legal proceedings—a failure to file a defence and attend court can result in judgment on admitted facts without any investigation of the merits.
The case also illustrates the practical toolkit available to liquidators pursuing director liability claims when those directors lack apparent financial capacity to satisfy judgments. While Berry’s statement that he had “no financial capacity to pay” did not prevent judgment, it may affect enforcement options available to the liquidator in subsequent stages of the proceeding.