Hi everyone - curious to hear thoughts here - we are in a situation where we sold our property in Darwin in 2018 to a buyer who purchased it under a Company name and signed it as the Managing Director. The contract is unconditional and we also agreed to a 6 month settlement with weekly rent of $450 to be paid. After the cooling off period the buyer tried to request that the purchase be subject to the sale of one of his apartments and listed 2 properties he was going to sell to fund the purchase of ours. We declined this and the contract remained as unconditional. Within 3 weeks he started missing rent payments and to fastforward a bit, failed to settle 6 months later and owed over $4,000 in missed rent. To further rub salt into the wound we found out he had our apartment on his company website advertised as short stay accommodation (he owns a short stay apartment company with apartments around Australia) yet still could not pay us weekly rent. Just prior to the 6 month due settlement date he requested an extension for a further 3 months at no penalty - we declined this given he already had 6 months plus he was $4,000 behind in rent. We are now 9 months in, have just surpassed the date he requested another extension to, has stopped paying rent altogether and is now owing us over $24,000. He has failed to communicate even with lawyers we have engaged since the 6 month mark however we have heard his finance applications have failed however he does have an option to purchase via his super but doesn’t want to pay the fees. We have also just found out he has also sold both apartments he initially stated he would sell to fund the purchase of our apartment. I have checked with ASIC and have noted he has also removed any assets from under this company name he has purchased our apartment in, and has told our agent he is not liable to pay us anything as he has an “asset poor” company, even though he runs under other ACN’s and has multiple apartments. Keen to hear whether this buyer can now hide behind this ACN that has no assets and walk - surely he is liable for something? We understand all of the penalties etc including sale difference if resold however want to hear thoughts - it seems to us he never intended buying our property hence has purchased it under a shell company to protect himself.
NT Breach of contract under Company name
- Thread starter Greg1974
- Start date
Corporations (companies) are a separate legal entity capable of being sued in their own name. If that is who you contracted with then that is who you have the cause of action with - not the managing director personally. This is why it is fairly standard practice to get personal guarantees when dealing with companies (bit late for that here obviously).
You might technically be able to prove some form of fraud or negligence on his part but the complexity, time and expense in doing so, if possible, would likely not make it worth doing so. There is potentially one other option I can see but it is not without time and expense - see below.
A better option might be to terminate the contract, forfeit the deposit if possible, and seek immediate possession.
Then, and here comes the time and expense part plus it being only a possible success:
- Sue the company for the unpaid rent. If it can't pay, get judgment against them;
- Once judgment is received, issue a statutory demand;
- Failure to comply with a valid statutory demand is an insolvency trigger - it creates the presumption the company is insolvent. Given you're owed over $5,000, that failure would then allow you to make a winding up application to the Federal Court;
- If that winding up application is successful, the Court will appoint liquidators to the company. You'd then need to convince the liquidators that the managing director was causing the company to incur debts he had no reasonable expectation that it would be able to service. This means he was causing the company to trade while insolvent.
It's a hard ask with a lots of 'ifs, buts, and maybes', and no better than a possibility even if the facts align in order because you're relying on someone else's decisions. However, if you could get that 'trading while insolvent' to stick against the managing director then he'd be hit very hard with very severe potential penalties against him personally. If you could credibly put a package of evidence together just the very careful indication that's what you intend to do if he doesn't make amends could be enough to get you a positive result.
However, this is not something you play around with or do on your own. It must be very precise and a wrong move, or even the wrong expression of sentiment, can get you into trouble. Before contemplating this sort of pathway in any sense, get some solid legal advice from a solicitor in your state who knows this area after a thorough consideration of all the relevant facts.
It's usually a better idea to terminate and get out, lick your wounds, and teach it as a life lesson in trusting sharp business people.
You might technically be able to prove some form of fraud or negligence on his part but the complexity, time and expense in doing so, if possible, would likely not make it worth doing so. There is potentially one other option I can see but it is not without time and expense - see below.
A better option might be to terminate the contract, forfeit the deposit if possible, and seek immediate possession.
Then, and here comes the time and expense part plus it being only a possible success:
- Sue the company for the unpaid rent. If it can't pay, get judgment against them;
- Once judgment is received, issue a statutory demand;
- Failure to comply with a valid statutory demand is an insolvency trigger - it creates the presumption the company is insolvent. Given you're owed over $5,000, that failure would then allow you to make a winding up application to the Federal Court;
- If that winding up application is successful, the Court will appoint liquidators to the company. You'd then need to convince the liquidators that the managing director was causing the company to incur debts he had no reasonable expectation that it would be able to service. This means he was causing the company to trade while insolvent.
It's a hard ask with a lots of 'ifs, buts, and maybes', and no better than a possibility even if the facts align in order because you're relying on someone else's decisions. However, if you could get that 'trading while insolvent' to stick against the managing director then he'd be hit very hard with very severe potential penalties against him personally. If you could credibly put a package of evidence together just the very careful indication that's what you intend to do if he doesn't make amends could be enough to get you a positive result.
However, this is not something you play around with or do on your own. It must be very precise and a wrong move, or even the wrong expression of sentiment, can get you into trouble. Before contemplating this sort of pathway in any sense, get some solid legal advice from a solicitor in your state who knows this area after a thorough consideration of all the relevant facts.
It's usually a better idea to terminate and get out, lick your wounds, and teach it as a life lesson in trusting sharp business people.
Thanks for your reply Rob - yes a lesson learnt and to a degree a bit questionable as to why our conveyancer and agent failed to pick up on this given we are no experts in this space and relied on the fact that the contract would cover us - but also acknowledge we read and signed. From my awareness there are no assets at all sitting behind the ACN this person has purchased our property with however they have other ACN's with associated assets. I suspect they are in the process of winding up this ACN as we speak to reinforce the "asset poor" defence as such we are lodging papers to the court asap as from my awareness if a claim exists to the court prior to the ACN being wound up then the matter can be reviewed? It's just frustrating as we know this person has sold properties they own since we entered into this contract and they are certainly not asset poor based upon their other ACN's.
To be honest, based upon the conduct and evidence we have I still cannot understand how someone can behave in such a disgraceful manner, intentionally breach a legal contract, cause significant financial duress to a family who have only shown courtesy and afforded everything in good faith to the buyer (above and beyond), then walk with thousands being owed because the legal system supports a loophole where they can hide behind an ACN - surely a court would clearly see the chronological actions over the course of 10 months (from email communications, to evidence of assets being sold, changes via ASIC to the ACN members, owed rents, statements from conveyancers, the agent, lawyers, ourselves etc) from this individual and make a judgement based upon this factual evidence opposed to what seems to be a commonly used loophole used by such people where it seems, and certainly in our case, that they held a conscious intent of wrongdoing. If that intent can be proved to a court surely there would be a ruling where we would receive as a minimum, rent owed? Or does a court purely take the view the purchase is in an ACN, as such any behaviour from the signatory, being the MD, does not matter - it almost seems this legal space can harbour criminals if that makes sense! We are just about to embark on a costly and stressful journey however based upon our own values, we cannot let someone like this just walk over us and walk away laughing - we need to give it a good go and as a minimum, show a court the damage this person has done. Hopefully we may get some reassurance at the end that the legal system acknowledged this sort of behaviour and penalties apply! Thanks again for your response - appreciated.
To be honest, based upon the conduct and evidence we have I still cannot understand how someone can behave in such a disgraceful manner, intentionally breach a legal contract, cause significant financial duress to a family who have only shown courtesy and afforded everything in good faith to the buyer (above and beyond), then walk with thousands being owed because the legal system supports a loophole where they can hide behind an ACN - surely a court would clearly see the chronological actions over the course of 10 months (from email communications, to evidence of assets being sold, changes via ASIC to the ACN members, owed rents, statements from conveyancers, the agent, lawyers, ourselves etc) from this individual and make a judgement based upon this factual evidence opposed to what seems to be a commonly used loophole used by such people where it seems, and certainly in our case, that they held a conscious intent of wrongdoing. If that intent can be proved to a court surely there would be a ruling where we would receive as a minimum, rent owed? Or does a court purely take the view the purchase is in an ACN, as such any behaviour from the signatory, being the MD, does not matter - it almost seems this legal space can harbour criminals if that makes sense! We are just about to embark on a costly and stressful journey however based upon our own values, we cannot let someone like this just walk over us and walk away laughing - we need to give it a good go and as a minimum, show a court the damage this person has done. Hopefully we may get some reassurance at the end that the legal system acknowledged this sort of behaviour and penalties apply! Thanks again for your response - appreciated.
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