CDC Services Limited (in liquidation) v Clark - [2023] NZHC 2392

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-374

[2023] NZHC 2392

UNDER the Companies Act 1993

IN THE MATTER

of the liquidation of CDC Services Limited (in liquidation)

BETWEEN

CDC SERVICES LIMITED (IN LIQUIDATION)

First Plaintiff

KEATON PRONK and IAIN McLENNAN,

as liquidators of CDC Services Limited (in liquidation)

Second Plaintiffs

AND

DAVID WAYNE CLARK

Defendant

Hearing: 14 August 2023

Appearances:

A W Johnson for Plaintiffs

B J Norling and A Cherkashina for Defendant

Judgment:

31 August 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

(summary judgment application)

This judgment was delivered by me on 31 August 2023 at 2:30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

……

CDC SERVICES LIMITED (IN LIQUIDATION) v CLARK [2023] NZHC 2392 [31 August 2023]

[1] CDC Services Limited (in liq) (CDC) was incorporated in mid-2016 and was originally called Clark Global Limited after its sole director and shareholder, David Clark, the defendant. While incorporated in 2016, it seems common ground the company did not commence trading until February 2020 – Mr Clark giving that date at the hearing with which counsel for CDC did not take issue. The company failed within a little over 20 months. It was liquidated by Mr Clark on 8 November 2021. The liquidator appointed by Mr Clark was replaced by Messrs Pronk and McLennan, the second plaintiffs, on 17 November 2021.

[2]Messrs Pronk and McLennan have accepted creditors’ claims in excess of

$1,000,000.00 from customers of CDC, albeit those claims are disputed by Mr Clark. Also accepted is a claim by the Inland Revenue Department (IRD) of $99,617.01 including GST $73,432.29 of which $58,515.17 was owing as at 31 March 2021 with unpaid amounts owing going back to 29 February 2020 and employer activities (that is PAYE et cetera) of $13,044.41. Mr Clark does not dispute CDC owed money to the IRD but says: “I am yet to review the quantum claimed”. The accounts as at 31 March 2021, signed by Mr Clark, include GST payable of $60,959 as a current liability, which is close to the figure claimed by the IRD of $58,515.17, as outstanding as at 31 March 2021.

[3] The liquidators claim that Mr Clark’s current account requires substantial adjustment, that he breached his director’s duties and failed to keep adequate company records. Summary judgment is sought in respect of the claims relating to Mr Clark’s current account and for liability only in respect of the failure to keep company records.

The nature of CDC’s business

[4] CDC’s website listed its business as: “Custom build luxury 4x4 Motorhomes & Expedition vehicles built for all adventurers and off-road explorers”. They advertised their services for 4x4 motor homes and expedition vehicles as including “Design, development & consultancy, Base Vehicle procurement & management, Upgrades & renovations, Emergency works, Global Vehicle Shipping consultancy & management and Parts”. The company also claimed: “20 years of experience in the building and fabrication industry”.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 2392
Decision Date: 31 August 2023

CaseChat Overview and Summary

CDC Services Limited (in liquidation), through its liquidators, Keaton Pronk and Iain McLennan, brought an action against David Wayne Clark, the former director and shareholder of the company, seeking summary judgment on claims related to alleged breaches of director's duties and inadequate record-keeping. The High Court of New Zealand considered the application on August 31, 2023, following a hearing on August 14, 2023. The court allowed summary judgment for specific claims, while others were dismissed.

The court found that Mr Clark was liable for $52,500.00 in relation to funds he received from customers, including cash and bank deposits, which were not accounted for. Additionally, Mr Clark was held liable for the value of a Unimog truck shipped to the USA, which he had introduced to the company at an inflated price. However, the court declined to grant summary judgment on claims regarding adjustments to Mr Clark's current account for stock introduced by him, unaccounted for stock, and the value of another Unimog truck (GBLMOG) introduced by Mr Clark. The court found that these claims required further investigation and were not suitable for summary judgment.

Regarding the claim that Mr Clark failed to keep adequate records, the court found that he did not maintain proper accounting records for the value of GBLMOG and stock records, which contributed to the company's inability to pay its debts. However, the court decided not to enter judgment for liability at this stage, as further hearings were required to determine the extent of the missing records and the quantum of the claim. The court reserved the issue of costs, requesting submissions from both parties within a specified timeframe.

Orders