On 29 September 2015, in Fonterra Brands (Australia) Pty Ltd v Viropoulos (No 3) [2015] FCA 1050 the Federal Court dismissed an application by Fonterra Brands (Australia) Pty Ltd (Fonterra).
Kemp Strang acted for the successful respondents.
The application alleged, among other things, misleading and deceptive conduct against the director of a company in liquidation and also against a company which purchased the plant and equipment from the company in liquidation.
By way of a short background:
- Fonterra, the applicant, supplied milk and dairy products to Falcon GT. Mr Viropoulos, the first respondent, was the director of Falcon GT;
- Between September 2009 and early January 2010, Falcon GT undertaking its usual practice, placed orders with Fonterra for the supply of milk and dairy products;
- On 15 October 2009, Falcon GT sold its plant and equipment to FCD Holdings Pty Ltd (FCD), the second respondent; and
- On 20 January 2010 an administrator was appointed to Falcon GT and it was subsequently placed into liquidation.
Fonterra alleged in its claim that at the time the goods were sold and delivered, Falcon and its controller Mr Viropoulos, never intended to pay for the goods. Fonterra alleged that Mr Viropoulos was liable for Falcon GT's failure to pay for the goods. The claim further alleged that FCD was liable for the conduct of Falcon as it was the beneficiary of that conduct through acquiring Falcon GT's plant and equipment.
Fonterra ultimately alleged that there was a "strategy" conceived to avoid paying creditors, namely Fonterra.
Justice Robertson dismissed Fonterra's claim and refused to draw the suggested inferences.
In his judgment, Justice Robertson held that when evaluating whether the respondents had a strategy or scheme never to pay Fonterra:
- the evidence had to be evaluated as a whole;
- the Court must consider the gravity of the matters alleged;
- the Court had to consider contemporaneous events in light of the then objective surrounding circumstances and not a retrospective view with the benefit of hindsight; and
- the applicant had to prove fraud and that the same fraudulent intention applied to all of the orders placed indiscriminately.
The Court accepted Mr Viropoulos' evidence in respect of the relevant events and as a result Fonterra's case failed.
The case provides some insight into the high evidentiary burden faced by creditors who wish to pursue the director of a company in liquidation for misleading and deceptive conduct as the controller of that company.
The case further demonstrates that in the context of alleging misleading and deceptive conduct the Courts are reluctant to pierce the corporate veil.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
