Some years ago there was an unfortunate and unsuccessful defence made by a director of a company that she did not take part in the management of her company because her time was taken up as a housewife and mother.
She said that when requested to become a director, she thought she had to accept as a wife. She agreed that, from time to time, she signed company documents, but that they were not explained to her and signature occurred in situations in which:
“I would usually have a frying pan in one hand and be signing with the other.”
Her defence under s 588FGB(5) – that, “because of illness or for some other good reason”, she did not take part in the management of the company at the payment time – was unsuccessful: Deputy Commissioner of Taxation v Clark [2003] NSWCA 91.
“One aspect of the directors’ duty of care and diligence is a core, irreducible requirement of participation in the management of the company. Such a requirement is one of the factors underlying the scheme for insolvent trading of which s588FGB is a part. Such participation is a basal structural feature of Australian corporations law”.
Many years later, in 2026, we have a director making similar and unfortunate claims in relation to a company of which they were the sole director – that they were
“uneducated without any of the basic knowledge or skills necessary to take part in the management of the companies; they did not understand why they were a director, nor did they have any knowledge of what the role of a director entailed …”.
That this was even argued was quite remarkable. In any event, it was not accepted in light of evidence showing otherwise: Deputy Commissioner of Taxation v Clayton [2026] QSC 236. The director was liable for $2.6 million.
Defences of “illness or for some other good reason” under various provisions have been narrowly interpreted in the face of the important duties of a company director: see for example Kim v JM World AU Pty Ltd (in liq); Bak v JM World AU Pty Ltd (in liq) [2026] NSWCA 146.
Coercive control
Neither case comes within the focus of a government announced intent to legislate to prevent perpetrators from
“using the tax and corporate systems to create debts as a form of coercive control and to make perpetrators accountable for those debts where they do”.
This follows recommendation 55 of the Parliamentary Joint Committee on Corporations and Financial Services Report – Financial abuse: an insidious form of domestic violence, December 2024, that the Corporations Act be amended
“to ensure that the company director provisions appropriately recognise family and domestic violence, including financial abuse, as a reason why a director may be regarded as not in fact managing a company”.
That would require the abused spouse to raise that defence in the event that proceedings are brought against them, requiring evidence of the claimed coercive control as excusing what was in DCT v Clayton a significant tax liability.
Bankruptcy
In a bankruptcy context, the Federal Court has dismissed an annulment application based on the bankrupt’s claim that she was unaware of the 2022 bankruptcy proceedings in which the sequestration order made because of the exercise of coercive control over her.
Her claim was that she had been the subject of domestic abuse, and that emails and other communications had been interfered with or not been made by her at all, such that only in 2025 did she become aware that she was bankrupt.
Her bankruptcy trustee did not support her annulment and Justice Stephen McDonald refused it, in effect not accepting much of the extensive evidence on which she relied. See https://murrayslegal.com.au/blog/2026/05/22/coercive-control-claim-in-a-bankruptcy/
In another bankruptcy matter, a claim by the trustee against Mr H for moneys said to have been transferred to him by the bankrupt Ms W was defended on the basis that she had exerted coercive control over him leading him to agreeing to hold money for her, which he later repaid. But the moneys were then accessed and used by the bankrupt for her own purposes. Mr H claimed that she had access to his email account and would send emails in his name: King (Trustee) v Hockings (No 2) [2026] FCA 1537
Strong evidence is needed in support of an annulment on the basis that the order “ought not to have been made”. It is conceivable however that a situation of coercion could allow a bankruptcy to be annulled on that basis in circumstances where the person was left unaware of the bankruptcy action being brought, or because the debt was not in fact theirs.
Criminal conduct
Coercive control can extend to criminal conduct, for example in NSW, since 2024, where a person uses abusive behaviour towards a current or former intimate partner with the intention to coerce or control them. Its extension beyond intimate partner relationships is under review.
Next
The federal government says it will introduce draft legislation in due course. Defining the defence and its limits might be difficult.
