Personal liability of members of management committees of
incorporated associations for debts incurred by the association if
it traded while insolvent has been an uncertain area of law in
Queensland. Directors of companies that trade while insolvent have
potentially been personally liable for debts incurred by the
company, but there has always been a question mark over whether
members of management committees of incorporated associations face
the same personal liability.
Now, a recent decision of the Supreme Court of Queensland has
suppressed the controversy in Queensland, for the time being at
Partner Darrell Jardine and Senior Associate Jason Down discuss
In the decision of Robson & Ors v Commissioner of
Taxation  QSC 76, Justice Jackson held that the part of
the Corporations Act 2001 that empowers liquidators to
recover property or seek compensation for the benefit of creditors
of an insolvent entity, which includes the provisions dealing with
insolvent trading, does not apply to an incorporated
In his decision, Justice Jackson examined the interaction
between the provisions of the Associations Incorporation Act
1981 (Qld), the principal legislation in Queensland governing
incorporated associations, and the Corporations Act 2001, in
relation to the winding up of an incorporated association and the
recovery of unfair preference payments by the liquidator of the
In short, his Honour held that a liquidator of an incorporated
association could not seek to recover unfair preference payments
from a debtor of the incorporated association because Part 5.7B of
the Corporations Act 2001 does not apply in the winding up
of the incorporated association.
While his Honour's reasons for his decision were in relation
to a claim for the recovery of an unfair preference payment, the
principle expressed that Part 5.7B of the Corporations Act
2001 does not apply to the winding up of an incorporated
association would have general application to those provisions
dealing with insolvent trading, with the result that a liquidator
could not pursue members of management committees personally for
debts incurred while the association was insolvent.
Justice Jackson also specifically provides an indication in his
reasons for decision as to how to reverse the effect of the current
legislation by a simple amendment to the Associations
Incorporation Act 1981 (Qld). However, that is a matter for
the legislature to address. The law, as it currently stands, is as
stated by Justice Jackson in his decision.
Despite the decision in Robson, members of management
committees should take care in the exercise of their roles. Members
still owe duties of good faith and loyalty to the association and a
duty to exercise reasonable care and skill in carrying out the role
of a management committee member.
When determining if a DOCA is to be terminated, public interest can, and often will, outweigh any benefit to creditors.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).