Question 5

In 1999, Henry was the owner of a very successful business called "Sleepy bed". In 2002, he decides to incorporate a company called: "Sleepy Bed Pty Ltd". He registers the company and then enters into a contract with the company for the sale of his business. As consideration for the purchase of the business, the company issued the following:

- a substantial block of shares as fully paid and,

- debentures for a further substantial sum secured by a charge on the whole assets of the company's asset.

Though the business had been prosperous, strikes brought this state of affairs to an end. Henry was considering borrowing money to salvage the situation but shortly before that part of the business was destroyed by fire. Henry was virtually running the business by himself and was severally injured.

Following the failure of the company to pay its creditors, the company was put under liquidation. The proceeds of the realisation of the assets were less than the amount owed by the company. Henry's claim in relation to the debentures was rejected by the liquidator who asked the court to order Henry to contribute to the assets of the company enough to pay all the creditors. Henry counter claimed and asked for repayment of his debenture and for compensations for the injury that he suffered as an employee of the company.

Advice the parties involved on these matters.