Reynolds as Liquidator of Bar and Bistro Limited (in liq) v Lochiel Corporation Limited HC Auckland CIV 2009-404-501

[2010] NZHC 942

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-501

BETWEEN  GRANT BRUCE REYNOLDS AS LIQUIDATOR OF BAR AND BISTRO LIMITED (IN LIQUIDATION)

First Plaintiff

ANDBAR AND BISTRO LIMITED (IN LIQUIDATION)

Second Plaintiff

ANDLOCHIEL CORPORATION LIMITED First Defendant

ANDALEXANDER MIROSLAV BLAGOJEVIC

Second Defendant

Hearing:         20 May 2010

Appearances: B M K Pamatatau for First and Second Plaintiffs

No appearance for First and Second Defendants

Judgment:      20 May 2010

JUDGMENT OF COOPER J

Solicitors:

Malcolm Whitlock, PO Box 100449, North Shore City 0745

Copy to:

B M K Pamatatau, PO Box 2422, Shortland Street, Auckland 1140

J Garrett, PO Box 301297, Albany, North Shore City 0752

REYNOLDS AS LIQUIDATOR OF BAR AND BISTRO LIMITED (IN LIQUIDATION) AND ANOR V LOCHIEL CORPORATION LIMITED AND ANOR HC AK CIV-2009-404-501  20 May 2010

[1]      In the statement of claim in this proceeding filed on 29 January 2009 the first plaintiff alleged that the second defendant was the sole director and shareholder of the first defendant and also the sole director and owner of 50 per cent of the shares in Bar and Bistro Limited (In Liquidation) (“the company”).

[2]      It was asserted that at all material times the second defendant and a relative controlled  the  first  defendant  and  the  company.    The first  plaintiff,  who  is  the liquidator of the company, alleged that between 26 June 2007 and October 2008 the second defendant agreed to the company incurring substantial obligations in connection with the establishment and operation of a restaurant business located at

237 Victoria Street, Hamilton known as the Sirocco Restaurant (“the business”).

[3]      The company was unable to meet its obligations and the plaintiff asserts that the second defendant did not believe the obligations could be performed at the time they were assumed and acted with reckless disregard to the interests of creditors in allowing the obligations to be incurred.  It is claimed that pursuant to ss 135 and 136 of the Companies Act 1993 the second defendant breached his statutory duty as a director of the company.

[4]      The second plaintiff has obtained judgment against the first defendant in respect of allegations that in March 2008 the first defendant purchased the business at  a  gross  under  value.     The  plaintiff  being  entitled  to  recover  the  excess consideration from the first defendant under s 298 of the Companies Act since the transaction was between companies having directors who were relatives.

[5]      The first plaintiff now seeks judgment against the second defendant in respect of the amount of the company’s obligations.  There has been no appearance for the second defendant today and the matter has proceeded by way of formal proof.  The second defendant has taken no steps since being served on 2 April 2009 pursuant to an order for substituted service.

[6]      The first plaintiff has sworn an affidavit dated 18 March 2010.   He was appointed liquidator of the company pursuant to an order made by Associate Judge Faire on 20 October 2008.  I am satisfied from his affidavit and the investigations he

has carried out, that the second defendant caused the company to incur obligations to creditors in relation to the establishment and running of the business at a time when he did not have reasonable grounds for believing the company would be able to perform its obligations as and when it was required to do so.

[7]      Mr Reynolds has analysed the proofs of debt filed in the liquidation and has determined that the second defendant was responsible for causing the company to incur a portion of those debts, totalling some $156,250 at a time when the company had no reasonable means of satisfying those debts as they fell due.

[8]      The second defendant then caused the company to enter the agreement for sale and purchase to sell the business to a related party for the sum of $3 and at the same time entered into an agreement with his father whereby he personally received the sum of $50,000 for causing the company to enter into the agreement for sale and purchase.  The second plaintiff has been unable to locate or realise any assets of the company.

[9]     I am satisfied in the circumstances that the second defendant’s conduct constitutes a breach of s 136 of the Companies Act.  Pursuant to s 301 of that Act the first plaintiff seeks an inquiry by the Court into the conduct of the second defendant and an order that he contribute such sum towards the assets of the company as the Court thinks just.

[10]     Having considered the plaintiff’s affidavit and therefore inquired into the second defendant’s conduct under s 301(1) of the Companies Act as sought by the plaintiff, I make an order pursuant to s 301(1)(b)(ii) of the Act that the second defendant contribute the sum of $156,250 towards the assets of the company, being the portion of the unsecured creditor claims in the liquidation that he was responsible for causing the company to incur.

[11]     The plaintiff is also to have interest from the date of filing of the claim and costs calculated on a Category 2 Band B basis, together with disbursements.