Grounded Ones Limited v Hume

[2017] NZHC 447

IN THE HIGH COURT OF NEW ZEALAND

WELLINGTON REGISTRY

CIV-2016-485-581

[2017] NZHC 447

UNDER

the Companies Act 1993

IN THE MATTER OF

the liquidation of Grounded Ones Limited (In Liquidation)

BETWEEN

GROUNDED ONES LIMITED

Plaintiff

AND

ANGELA ELIZABETH HUME

First Defendant

AND

GRAEME HOWARD PILLIDGE

Second Defendant

Hearing:

16 February 2017

Appearances:

K C Francis for Plaintiff

No appearance by or on behalf of the Defendants

Judgment:

15 March 2017

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 15 March 2017 at 3.30pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Meredith Connell, Auckland

GROUNDED ONES LTD v HUME [2017] NZHC 447 [15 March 2017]

[1]                 The plaintiff, Grounded Ones Limited (the company), is in liquidation. The liquidator of the company is Mr Andrew Hawkes, of the firm KPMG, who has sworn an affidavit by way of formal proof in support of the plaintiff’s claim.

[2]                   The plaintiff company brings this proceeding against the first and second defendants, both of whom are shareholders of the company. The first defendant was the sole director of the company from its incorporation until the plaintiff was placed into liquidation by an order of the High Court at Wellington dated 11 August 2015.

[3]                 On behalf of the company, the liquidator seeks to recover from the first and second defendants the amount of their joint shareholders’ current account with the company as recorded in the company’s financial statements to 31 March 2014, together with further and subsequent drawings made by them between April 2014 and March 2015. The drawings were made by a large number of withdrawals of funds from the company’s ANZ bank account.

[4]                   The joint shareholders’ current account was accounted for as a current asset in the company’s financial statements for the year ending 31 March 2014. The entry in the financial statements described the asset as “Shareholders’ Overdrawn Current Account”, with a closing balance of $14,497.

[5]  The plaintiff claims that between 1 April 2014 and the date of liquidation of the company on 11 August 2015, the first and second defendants together withdrew a total sum of $95,576.83 from the company’s ANZ bank account for expenditure on personal items. The withdrawals were made by means of cash from ATM machines, other cash or cheque withdrawals, or EFTPOS transactions to meet personal expenses or for crediting funds to the defendants’ personal credit cards.

[6]                 At the formal proof hearing of this matter before me on 16 February 2017, counsel for the plaintiff referred the Court to the affidavit of Mr Hawkes in which he describes the background to the plaintiff’s claim. In his affidavit, Mr Hawkes gives details of the composition of the sum claimed by reference to the amount of the defendants’ overdrawn shareholders’ current account with the company as at 31 March

2014, and by reference to a series of debit entries in the company’s bank account statements representing the drawings made by the defendants.

[7]                 Although no financial statements for the company for the period between 1 April 2014 and the date of liquidation were prepared, Mr Hawkes’ evidence is that during that period the first and second defendants undertook a large number of transactions in the nature of personal drawings (the drawings) on the company’s funds which totalled $95,576.83. The composition of this sum is demonstrated by reference to the company’s ANZ bank statements, coupled with a schedule prepared by the plaintiff identifying each transaction which the plaintiff says were drawings of a personal nature which ought to have been coded and treated as entries comprising the defendants’ shareholders’ current account.

[8]                 In his affidavit Mr Hawkes says that the first and second defendants were previously in a relationship and that when the first defendant completed the liquidator’s written questionnaire she signed it as “Angela Hume-Pillidge”, thereby using the second defendant’s surname. Mr Hawkes further notes that the Companies Office records show that both defendants shared the same address at one time. Having regard to that situation and the relationship that appears to have existed, the plaintiff claims that the defendants were jointly responsible for their shareholders’ current account and the personal drawings. From the evidence it appears that the defendants were conducting their financial affairs in a manner that was joint and shared with no allocation or distinction being made between themselves as to who had liability for each drawing. In the circumstances, it is reasonable to conclude that they were proceeding in a manner consistent with conducting their finances jointly, at least in so far as making drawings or borrowing money from the company.

[9]                 Having reviewed the detailed schedule produced in evidence by the plaintiff and considered the nature of the transactions whereby funds were withdrawn from ATM machines or by way of cheque withdrawals, I am satisfied that the nature of the transactions were such as the plaintiff alleges, namely transactions by way of personal drawings that would be appropriately included in the shareholders’ current account as a debt due to the company.

[10]              I am also satisfied on the evidence that the defendants are both jointly and severally liable to repay the amount of the shareholders’ current account and the personal drawings made from the company’s ANZ bank account.

[11]              Shareholders’ loan accounts are repayable upon demand, and upon liquidation of the company became a debt due and owing to the company in liquidation. Mr Hawkes has deposed in his affidavit to having made formal written demand of the defendants for repayment of the current account and drawings. No reply or payment has been made.

[12]              The amount of the shareholders’ loan account and the personal drawings made by the defendants, are a debt owed by them to the company. I am satisfied by the evidence of Mr Hawkes that the debt remains outstanding, that the defendants are both jointly and severally indebted to the plaintiff for the shareholders’ current account and the drawings, and that the plaintiff is entitled to recover the full amount claimed from the defendants together with disbursements and legal costs.

[13]              Accordingly I enter judgment for the plaintiff against both the first and second defendants for the sum of $109,273.71, together with disbursements to be fixed by the Registrar.

[14]               The plaintiff is awarded costs to be fixed on a scale 2B basis, and as approved and settled by the Registrar.

[15]              Leave is reserved to counsel to file a memorandum as to costs, should any issue regarding costs arise that needs to be referred to me for determination.

Paul Davison J