This case has a very familiar small-business shape. An electrical contracting company fails. Liquidators look back through the company's dealings. The former sole director faces claims for insolvent trading, director-related transactions and a company debt. The parties compromise the dispute in a settlement deed, but the settlement payment is not made.
The settlement deed did a lot of work. It said the director would pay $70,000, creditors approved the liquidators entering into the deed, and if payment was not made after a default notice the company could either pursue the original claims or seek summary judgment for the default sum. The deed also contained admissions for the purpose of summary judgment, including that the default sum was a debt due and that there was no defence to it.
When the payment was missed, the liquidators gave written notice of default and later applied for judgment. Mr Aitchison did not file evidence or submissions and did not appear at the hearing. The Court accepted that he remained in default and that, under the deed, he had no reasonable prospect of defending the application for the default sum.
For directors and founders, the lesson is practical rather than abstract. A settlement deed is not a soft reset. If it contains clear default rights, consent-to-judgment language and costs provisions, a missed payment can lead to judgment, interest and fixed costs. Directors settling liquidation claims should make sure the payment timetable is realistic, funding is ready, and default consequences are understood before signing.