TO BE BASED ON AUSTRALIAN LAW

Benedicto and Prakash are the directors and shareholders of a "Healthy Solutions Pty Ltd" which imports personal protective equipment from the European Union for sale to various local health institutions. The company has a large warehouse where it keeps its goods, and distributes all its products from there.

Two months ago, the company entered into a contract to supply a large local health care provider with disposable face masks. Benedicto and Prakash were excited and they ordered a large shipment from the European Union to enable them honour the contract. The company ordered sixty shipments of face masks from their supplier and have paid a large deposit. The shipping company which brings the goods into Australia is now waiting for payment.

Healthy Solutions makes its first delivery but soon thereafter there are concerns about the safety of this type of mask. The government issues a order banning these masks and specifies that only "N95" masks can be used in the health services sector. As a result the health care provider cancels all further orders. Healthy Solutions now has no future revenue. They have huge stocks of masks which cannot be sold. The shipping company needs to be paid. There are various other bills due to the tax office. Employees and other service providers have also not been paid. It is not certain how all these expenses will be met.

Benedicto and Prakash are desperate, and do not know what to do. They approach you for advice on whether the company is insolvent, and if it is, what they must do.

REQUIRED:

With reference to relevant sections of legislation, use the IRAC legal problem-solving approach to advise Benedicto and Prakash on whether their company, Healthy Solutions Pty Ltd, is insolvent and if it is, what are the implications of such insolvency for Benedicto and Prakash and for the company in relation to any action which they may take.

Your answer needs to clearly include 5 requirements:

1. ISSUE: Identify the legal issue(s) arising from the facts of the case study
2. RULE: Identify the appropriate legal rules that requires discussion in the case study
3. ANALYSIS: Apply the law to the facts of the case study
4. CONCLUSION: Reach a conclusion/ give practical advice to your client.
5. List appropriate case law used to support your answer.