By Patrick J Lewis*

The decision in Hall v Poolman (2007) 215 FLR 243; 65 ACSR 123 examined liability for decisions made by experienced businesspeople years earlier in times of financial hardship. Palmer J exercised his discretion under s 1318 to relieve the director from liability for insolvent trading. However, he narrowed the review of “all the circumstances” to whether the action was commercially reasonable. Directors must be able to make decisions, which inevitably involve some degree of commercial risk, if the economy is to be advanced. The currently available defences to the duty to prevent insolvent trading in ss 588H and 1318 are both underutilised and rarely successful. A more general defence should be introduced to allow directors greater flexibility in attempting informal work-outs of distressed companies.

The full article can be accessed here: “Insolvent trading defences after Hall v Poolman” (2010) 28 C&SLJ 396.

* LLB (Hons I) (University of Sydney).