Jones v Goertzen - [2020] NZHC 2136

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-203

[2020] NZHC 2136

IN THE MATTER
of the receivership of CORE INFRASTRUCTURE LIMITED (in

receivership)

BETWEEN

KIERAN MICHAEL JONES and THOMAS

LEE RODEWALD as receivers of Core Infrastructure Limited (in receivership) Plaintiffs

AND

UNKNOWN DEFENDANTS

First defendants

JASON GOERTZEN

Second defendant

Virtual hearing: 20 August 2020

Appearances:

R B Hucker and N A Muir for the plaintiff Mr Goertzen in person (by telephone)

Judgment:

21 August 2020

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 21 August 2020 at 4.00pm.
Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Solicitors:
Hucker & Associates, Auckland

JONES v GOERTZEN [2020] NZHC 2136 [21 August 2020]

[1] On the present applications, the plaintiffs (the “receivers”) seek summary judgment of their amended claim’s fifth cause of action against the second defendant “Mr Goertzen”), for recovery of his overdrawn current account with Core Infrastructure Limited (the “Company”), and continuation of freezing orders over the defendants’ bank accounts claimed to operate in part for the Company’s benefit.

Background

[2] The Company operated a quarry, to supply rock to a contractor for use in construction of Wellington’s Transmission Gully project. Mr Goertzen is its sole director and shareholder. It was placed into receivership on 20 January 2020, at the behest of one of its suppliers, shortly after which its supply contract was terminated.

[3] In the course of investigating the Company’s affairs, the receivers identified the Company’s invoiced income under the contract was paid into bank accounts held in the name of third parties, understood to be related to Mr Goertzen, from which sums also were disbursed on Company business. From the Company’s 2018 financial statement, which recorded Mr Goertzen’s $245,733 current account liability to the Company, the receivers used the Company’s external accountant’s ledger records to reconstruct Mr Goertzen’s current account liability as $1,566,364.31 at 1 April 2020, which their fifth cause of action sought to recover. Lawyers assisting Mr Goertzen queried if that calculation involved a double-counting, which the receivers accepted.

[4] Mr Goertzen explained the Company’s 2018 financial statement was rife with error attributable to its then in-house accountant, which the Company had set out to correct, initially using another internal accountant who contributed additional error but then external accountants. The process had not been completed at the time of the Company’s receivership. Mr Goertzen has a backup copy of the Company’s Moneyworks accounting system, which he says will establish “the current account to be in negative value ie the company owes the shareholder money”.

[5] On their further investigations in the short period of time since receipt of the Moneyworks data from Mr Goertzen, the receivers consider the Moneyworks records “substantively reconcile against” the data from which they reconstructed the current account. But they note the Company’s external accountants’ November 2019 advice

to Mr Goertzen the ledgers were only “55%” complete. The accountants agreed with the receivers the…

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.

Continue reading Jones v Goertzen

Details

AGLC: Jones v Goertzen [2020] NZHC 2136
Case: [2020] NZHC 2136
Decision Date: 21 August 2020

CaseChat Overview and Summary

The plaintiffs, receivers of Core Infrastructure Limited, sought summary judgment against the second defendant, Mr Goertzen, for recovery of his overdrawn current account with the company, and continuation of freezing orders over the defendants’ bank accounts claimed to operate in part for the company’s benefit. The company operated a quarry to supply rock for the construction of Wellington’s Transmission Gully project. Mr Goertzen is the company’s sole director and shareholder. The company was placed into receivership on 20 January 2020, shortly after its supply contract was terminated. The receivers sought to recover Mr Goertzen’s current account liability, which they had reconstructed as $1,566,364.31 at 1 April 2020. Mr Goertzen argued that his current account was in negative value, that is, the company owed him money. The receivers recalculated Mr Goertzen’s current account to arrive at a liability of $500,388.81. They considered the Moneyworks data Mr Goertzen provided was unreliable, and omitted inter-company charges and had unreliable opening balances and assets listings. The court found that there was no conflict of evidence such as may make summary judgment inappropriate, and Mr Goertzen had not provided a sufficient basis for a different calculation of his current account liability. The court gave judgment against Mr Goertzen on the fifth cause of action in the amount of $500,388.81. It also continued the freezing orders over the defendants’ bank accounts, with leave to the account-holders to apply for their discharge or variation on five working days’ notice, any such application to be treated as urgent.

The court found that a shareholder’s overdrawn current account is a due debt to the company, carrying with it a “consequent obligation to repay” on demand. The court found that the receivers had the onus throughout to satisfy it that Mr Goertzen had no defence. The only defence available here can be as to quantum. The court found that there was no dispute the company’s own financial records were in disarray, and Mr Goertzen, as the company’s director, is the person fixed by s 194 of the Companies Act 1993 with ensuring its accounting records were kept. The court found that Mr Goertzen’s late dump on the receivers of the Moneyworks data was not effective to offer a defence to their calculation of the quantum of Mr Goertzen’s liability. The court also found that any dispute Mr Goertzen may have with the receivers’ conduct did not afford a defence to repay his current account liability.

Orders