Directors who provide Statutory Declarations personally liable
In the decision of 470 St Kilda Road Pty Ltd v Robinson  FCA 597, the Federal Court of Australia found that a Chief Operating Officer of a building and construction company was personally liable for falsely declaring in a statutory declaration that all subcontractors had been paid.
In October 2010, 470 St Kilda Road Pty Ltd (“the Principal”) engaged Reed Constructions Pty Ltd (“the Builder”) for the redevelopment of an office building at 470 St Kilda Road, Melbourne (“the Contract”). The Contract required the Builder to provide a statutory declaration prior to delivering a payment claim which affirmed all monies owing to subcontractors and suppliers had been paid.
Mr Glenn Robinson (“Mr Robinson”), as the Chief Operating Officer of the Builder, sent to the Principal a statutory declaration (“the Declaration”) confirming all subcontractors and suppliers have been paid in full. The Builder then submitted a payment claim seeking payment.
The Principal relied upon the Declaration and made payment $1,426,641.70 to the Builder.
The Declaration was later discovered to be false after the Builder entered into liquidation owing $132 million to unsecured creditors.
Mr Robinson argued that the Declaration was merely a statement of his mind and one as to the enquires that had been made to inform that state of mind.
The Court held that the Declaration of Mr Robinson was not merely a statement of his state of mind, but rather a solemn promise acknowledging that the contents are true and correct, which, if falsified, amounts to perjury.
Mr Robinson was held to have engaged in misleading and deceptive conduct as he knew the Declaration was untrue and had the Principal known the true position of the Builder, it would not have made payment of the payment claim.
The Court held Mr Robinson personally liable to pay the Principal the sum of $1,426,641.70, being the total of the claim previously submitted by the Builder to the Principal.
The requirement for statutory declarations certifying payment of all outstanding subcontractors and suppliers is commonplace in the construction industry. The practical effect of the decision highlights the importance of ensuring that all reasonable steps are taken to warrant the truth of the statutory declarations at the time it is signed. It also highlights the consequences of failing to take these steps or for signing an untrue statutory declaration.
Additionally, directors need to be aware of the possible implications of this conduct on director’s liability insurance which may limit or void the director’s coverage.
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The above information is intended only as general information and should not be interpreted or relied upon for legal advice.