Scott v Khouri, in the matter of Skycorp Construction Group Pty Ltd (in liq)

This proceeding arose after Skycorp Construction Group Pty Ltd went into liquidation. The liquidators, Andrew Scott and William Honner, formed the view that Joseph Katrib, a director of the company, had caused the company to continue trading while insolvent. They brought a claim seeking to recover $96,972.59 as a debt due to the company.

The published reasons are short and procedural. They do not give a full commercial account of the company's projects, counterparties, cashflow position or the detailed debts said to have been incurred. What the reasons do show very clearly is the path the liquidators took to notify Mr Katrib and move the case forward. That procedural story is the centre of the decision.

The Court recorded that an ASIC search identified Mr Katrib's residential address in Merrylands, New South Wales. A letter of demand was sent there on 27 January 2026. The proceeding was then commenced on 12 March 2026. On 16 March 2026, the originating process and supporting affidavit were personally served on Mr Katrib by a licensed process server. Two days later, he was notified by SMS of the first case management hearing and told he was required to appear.

He did not appear. The Court then made orders requiring pleadings and evidence, including a deadline for any defence. The statement of claim and those orders were served by post. When no defence was filed, the plaintiffs sent a further warning letter saying that if a defence was not filed within seven days, they would seek default judgment. That letter was sent by Express Post and was also left with an adult occupant at the Merrylands address by a licensed process server.

The interlocutory application for default judgment and supporting affidavit were then served by Express Post, and another SMS was sent notifying Mr Katrib of the hearing date.

Despite all of that, Mr Katrib did not respond to any correspondence, including the SMS messages, and gave no indication that he intended to appear or participate. The Court accepted that he had been afforded ample opportunity to defend the proceeding but had failed to do so.

The application before Justice Jackman was for default judgment under r 5.23 of the Federal Court Rules 2011 (Cth). That rule allows an applicant to seek judgment where a respondent is in default, but it does not mean judgment is automatic. The Court emphasised that the power is discretionary and must be exercised cautiously.

The reasons refer to authority explaining that default judgment can give an applicant complete success without a trial, so the Court must still be satisfied that the applicant is entitled to the relief claimed. Importantly, the Court said there is no requirement that the default be intentional or amount to contumelious conduct, and no requirement that the default cause inordinate or inexcusable delay. Those matters may be relevant, but they are not preconditions.

In a pleaded case like this one, the key question is whether, on the face of the statement of claim, the applicant is entitled to the relief sought. The Court does not conduct a full merits hearing. It does not require the applicant to prove the claim by evidence in the same way as at trial. Instead, the pleaded facts are treated as admitted because of the default, and the Court asks whether those admitted facts establish the cause of action.

Here, the substantive cause of action relied on was insolvent trading under s 588G(2) of the Corporations Act 2001 (Cth). The Court therefore had to consider whether the statement of claim pleaded each element of that claim with sufficient particularity. If it did, and if the procedural history showed fair notice and default, judgment could be entered.

The Court summarised the statement of claim and held that it pleaded each element of the plaintiffs' insolvent trading case with sufficient particularity. In summary, the pleading alleged that the company was insolvent throughout the relevant period, either by operation of the presumption in s 588E(4) of the Corporations Act or as a matter of fact.

It also alleged that Mr Katrib was a director of the company at all material times from 24 November 2022 to the date of liquidation. The pleading then identified debts totalling $96,972.59 said to have been incurred while the company was insolvent during that period.

Beyond insolvency and debt incurrence, the pleading also addressed the knowledge element. It alleged that at the time the debts were incurred there were reasonable grounds for suspecting the company's insolvency, and that Mr Katrib was aware of those grounds, or that a reasonable person in his position would have been aware of them. It further alleged that he failed to prevent the company from incurring those debts.

That matters because a default judgment application is not won merely by saying a director ignored the case. The pleading still has to do the legal work. The Court must be able to see, from the statement of claim itself, that every required element is covered. Justice Jackman held that this threshold was met. Taken as admitted, the pleaded matters established liability under s 588G(2).

For business readers, this part of the decision is a reminder that pleadings are not just formal paperwork. In a default context, they can become the foundation for final judgment. If you are defending a claim, you need to engage before the pleading is effectively treated as admitted.

Justice Jackman accepted the plaintiffs' submission that Mr Katrib had been afforded ample opportunity to defend the proceeding and had failed to do so. The Court referred to the repeated service and notification steps, including personal service, postal service, Express Post, a warning letter, and SMS notices about hearings. The reasons describe the procedural history as demonstrating sustained non-compliance and a failure to engage despite repeated notice.

The Court then turned to the statement of claim. It held that the pleading set out each element of the insolvent trading claim with sufficient particularity. Because the facts pleaded in the statement of claim were taken as admitted on the default application, those matters established each element of liability under s 588G(2) of the Corporations Act.

The Court therefore entered judgment for the first plaintiffs against the second defendant as a debt due to the second plaintiff in the amount of $96,972.59. Interest was also ordered under s 51A of the Federal Court of Australia Act 1976 (Cth), at the rate set out in the relevant Interest on Judgments Practice Note. Mr Katrib was also ordered to pay the plaintiffs' costs of the proceeding against him, including the costs of the interlocutory application dated 11 May 2026.

The decision was delivered ex tempore and revised from transcript on 21 May 2026. That helps explain why the reasons are concise and focused tightly on the default judgment question rather than the broader commercial background.

There are two practical messages in this case. The first is about director risk. If a company is insolvent and continues to incur debts, a liquidator may later investigate whether a director is exposed under s 588G(2). That is a personal exposure issue, not just a company problem.

The second message is about process. Even where a claim might have been contested, a director who does not engage can lose the chance to test the allegations. The Court did not need to decide a fully contested factual dispute here because the second defendant did not appear or file a defence. Once that happened, the Court's focus shifted to whether the pleading was legally sufficient on its face.

For many businesses, the immediate lesson is operational. Keep ASIC-linked addresses current. Make sure someone checks registered office mail and personal director correspondence. Treat letters from liquidators, process servers, courts and solicitors as urgent. If a hearing date is notified by SMS or other direct message, do not assume it can be ignored because formal documents have also been sent another way.

This case should not be read as saying every struggling company has traded insolvently, or that every liquidator claim will succeed. The published reasons do not contain a full factual examination of the company's finances. But they do show how quickly a claim can become judgment when a defendant does nothing. In that sense, the case is as much about governance and response systems as it is about insolvency law.

The judgment date was 21 May 2026. The reasons record several earlier procedural steps that are useful for understanding how the Court assessed notice and default. The liquidators were appointed on 6 March 2024. A letter of demand was sent on 27 January 2026. The proceeding was commenced on 12 March 2026, followed by personal service on 16 March 2026 and an SMS hearing notice on 18 March 2026.

The first case management hearing took place on 26 March 2026, when the Court ordered that any defence be filed by 23 April 2026. The statement of claim and those orders were served by post on 1 April 2026. A further default warning letter was sent on 1 May 2026 and left with an adult occupant on 8 May 2026. The default judgment application was filed on 11 May 2026 and served on 12 May 2026, with another SMS notice of the hearing. Judgment was then entered on 21 May 2026.

The reasons were delivered ex tempore and revised from transcript. That means the published text is authoritative, but concise. Readers looking for a full commercial narrative should be aware that the judgment is primarily a procedural decision about default judgment and the sufficiency of the pleaded insolvent trading claim.