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eason. In Australia, section 588M of the Corporations Act 2001 specifies, as in New
Zealand, that the purpose of recovery under the section is compensation for loss
suffered as a result of insolvent trading. The Australian section, like both the UK and
New Zealand sections, allows for the court‘s discretion in determining the amount
although section 588(2) and section 588(3) limit the maximum amount to be
recovered to the amount equal to the loss or damage. It is submitted that the
maximum amount to be obtained under section 301(b)(ii) of the New Zealand
Companies Act 1993 should also equal the amount of loss or damage since the Act
provides that the purpose of contribution is compensatory. This is because the
purpose of compensation is to put parties in the position they would have been in if
the breach had not occurred.
Section 588M(3) of the Australian Corporations Act 2001 allows creditors, in
addition to a liquidator, to commence action against directors for recovery. 121
Creditors‘ right to initiate an action under section 588M, however, is subject to the
requirement in Subdivision B of the sections. 122 The right to compensation under the
section is available to liquidators or creditors, regardless of whether the director has
been convicted of an offence in relation to contravention of the sections 123 or
whether a civil penalty has been imposed on him or her. 124
The Malaysian insolvent trading provision in section 304(2) of the Companies Act
1965 allows for a liquidator, creditor or contributory of the company to apply to the
court for a declaration of personal responsibility.
121 See Metropolitan Fire Systems Pty Ltd v Miller (1997) 23 ACSR 699.
122 See section 588R of the Australian Corporations Act 2001 which requires the liquidator‘s written
consent before a creditor can proceed to take action against directors. See also section 588T and
section 588U of the Act.
123 See section 588M(e) of the Australian Corporations Act 2001.
124 See section 588M(f) of the Australian Corporations Act 2001.
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