Owens v Coleman - [2016] NZHC 2644

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-138 [2016] NZHC 2644

UNDER the Companies Act 1993

IN THE MATTER

of the liquidation of Hagfish NZ Ltd (In
Liquidation)

BETWEEN

COLIN DAVID OWENS AND DAVID STUART VANCE AS LIQUIDATORS OF HAGFISH NZ LTD (IN LIQUIDATION) Plaintiffs

AND

PETER COLEMAN First Defendant

PETER COLEMAN and TRUST MANAGEMENT SERVICES LTD as trustees of The Hunua Holdings Trust Second Defendants

Hearing: 8 September 2016

Counsel:

S J F Eglinton for Plaintiffs

Judgment:

4 November 2016

JUDGMENT OF BREWER J

This judgment was delivered by me on 4 November 2016 at 4:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors: Ford Sumner (Wellington) for Plaintiffs

OWENS AND VANCE v COLEMAN [2016] NZHC 2644 [4 November 2016]

Introduction

[1] The plaintiffs, as liquidators of Hagfish NZ Ltd (“Hagfish”), seek judgment

by default on the claims set out in their amended statement of claim dated 12 July

2016.

[2] At the formal proof hearing on 8 September 2016, Ms Eglinton withdrew the claim against the second defendants.

[3] The formal proof hearing was not completed. I adjourned it part-heard because the one-hour allocated for it was insufficient and because I was unsure of the basis on which the plaintiffs were advancing the causes of action alleging breaches of duties owed by the defendant under the Companies Act 1993 (“the Act”).1 I said I would consider the material filed by the plaintiffs and issue a directions or case management minute if further evidential material would be of assistance.2

[4] This Judgment determines the first and second causes of action and gives directions as to the determination of the fourth to sixth causes of action.

Background

[5] Hagfish was incorporated on 24 September 2012 for the purpose of exporting hagfish3 from New Zealand to Japan and Korea. It was put into liquidation on
20 February 2015. Mr Coleman was the sole director.

First cause of action

[6] The first cause of action claims $51,886.59 from Mr Coleman by way of repayment of his overdrawn current account.

[7] The affidavit of Louise Adrienne Craig sworn on 27 June 2016 sets out the background to the liquidation, the indebtedness of Hagfish at the date of liquidation,4

1      The fourth to sixth causes of action.
2      Owens & Vance v Coleman HC Auckland CIV-2016-404-138, 8 September 2016 (Minute).
3      According to Wikipedia, hagfish are eel-shaped, slime producing marine fish which are unique in that they possess a skull but not a vertebral column.
4      $374,793.91, excluding interest owing on a debt to the Commissioner of Inland Revenue.

and the need to reconstruct Hagfish’s financial transactions by analysis of its bank statements. The need arose because Mr Coleman failed to provide any books, records or documents despite being served with a notice under s 261 of the Act.

[8] I am satisfied, having regard to Ms Craig’s affidavit, that Mr Coleman’s current account with Hagfish is $51,886.59, that it is overdrawn, that demand has been made on Mr…

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 Owens v Coleman

Details

AGLC: Owens v Coleman [2016] NZHC 2644
Case: [2016] NZHC 2644
Decision Date: 4 November 2016

CaseChat Overview and Summary

The case of Owens v Coleman is a judicial review of the liquidation of Hagfish NZ Ltd, where Colin David Owens and David Stuart Vance, as liquidators of Hagfish, sought judgment by default against Peter Coleman, the sole director of the company, and Trust Management Services Ltd as trustees of The Hunua Holdings Trust. The primary focus was on Coleman's conduct as the director of Hagfish, particularly whether he breached his fiduciary duties under the Companies Act 1993, leading to the company's insolvency. The court found Coleman liable for personal payments made at the company's expense and for failing to properly manage the company's tax obligations, resulting in additional liabilities. However, the court could not fully determine the extent of Coleman's liability for the company's other debts due to insufficient evidence regarding the company's financial status and insolvency timeline. The court ordered further evidence to be submitted, including expert opinions, and directed that a final judgment would be issued after reviewing the additional materials.

The key legal issues revolved around whether Coleman breached his duties under sections 131, 135, and 137 of the Companies Act 1993, and if so, what compensation should be ordered under section 301. Coleman was found liable for personal payments made to himself and for inadequate tax management. The court emphasized the need for a clear causal link between any breach of duty and subsequent loss to the company. The court concluded that Coleman must compensate the company for the amounts misappropriated and for the additional tax liabilities incurred due to his negligence. However, the court could not conclusively determine the full extent of Coleman's liability for the company's other debts without further evidence. The court ordered the plaintiffs to submit additional evidence by a specified date and indicated that a final judgment would follow the review of this evidence.

Orders