Tech Voice Data Limited (in liquidation) v Ovenden - [2015] NZHC 2766

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

CIV-2015-409-161

[2015] NZHC 2766

BETWEEN
TECH VOICE DATA LIMITED (IN LIQUIDATION)

First Plaintiff

VIVIEN JUDITH MADSEN-RIES and

HENRY DAVID LEVIN as liquidators of Tech Voice Data Limited (In Liquidation) Second Plaintiffs

AND

GRANT ASLAN OVENDEN

First Defendant

JOANNE OVENDEN
Second Defendant

JASON BRENT WOHNSIEDLER

Third Defendant

Hearing: 14 October 2015

Appearances:

PV Shackleton and CP Eason for the Plaintiffs No appearance for the Defendants

Judgment:

9 November 2015

JUDGMENT OF NICHOLAS DAVIDSON J

Issue

[1] The liquidators of Tech Voice Data Ltd (‘the Company’ or ‘Tech Voice’) sue its former directors in their personal capacities, and in their former capacities as directors.

TECH VOICE DATA LIMITED (IN LIQUIDATION) & ANOR v OVENDEN & ORS [2015] NZHC 2766
[9 November 2015]

[2] The action came before the Court as an undefended hearing, since the directors, Mr and Ms Ovenden and Mr Wohnsiedler, did not file anything in opposition. The plaintiffs’ submissions and evidence are therefore untested and, given the immediate and wider implications of judgment, the Court in the circumstances must be careful in reaching conclusions.

Background

[3] The first plaintiff is the Company, now in liquidation. It was incorporated in 2007 and traded until 2010. It went into liquidation on 18 September 2014. The second plaintiffs are the Company’s liquidators, Ms Madsen-Ries and Mr Levin, both of Deloitte.

[4] The first defendant is Mr Ovenden. He was a director of the Company from 13 September 2007 to 21 February 2008, and again from 1 September 2009 until the Company was liquidated. From 2007 to 26 February 2008 he held all the Company’s shares, and after 17 February 2009 held one of the Company’s 1000 shares.

[5] Ms Ovenden is the second defendant. She was a director from 21 February 2008 until about 8 November 2009. She held 800 shares from 26 February 2008 until 17 February 2009. Thereafter, she held one share.

[6] The third defendant is Mr Wohnsiedler. He was a director from 21 February 2008 until 11 April 2008, and held 200 shares from 26 February 2008 until 17 February 2009. Thereafter, he held one share.

[7] On 31 May 2008, the Company was in default of its obligations to pay the Inland Revenue Department (IRD) certain tax. The liquidators depose that it owed
$999.54 in Pay As You Earn tax (PAYE), and Goods and Services Tax (GST) in the order of $1,694.93.

[8] The liquidators assert that the Company’s financial statements for the financial years ending 31 March 2009 and 31 March 2010 show a net asset deficit and a working capital deficit. They reproduced these statements, which clearly indicate the

Company’s dire financial position at that time. The liquidators contend that the operating and asset deficits provide unequivocal evidence of the Company’s insolvency, at the very latest as of 31 March 2009. This financial strife led to liquidation.

[9] The IRD was the only creditor to have issued a claim against the Company and as at 19…

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: [2015] NZHC 2766
Decision Date: 9 November 2015

CaseChat Overview and Summary

Tech Voice Data Limited (Tech Voice), a company incorporated in 2007 and subsequently liquidated in 2014, has sued its former directors, Grant Ovenden, Joanne Ovenden, and Jason Wohnsiedler, seeking compensation for debts owed and breaches of directors' duties. The claims were heard by the Court in the absence of a defence from the defendants. The liquidators allege that the directors failed to prevent the company from continuing to trade after defaulting on tax payments to the Inland Revenue Department (IRD), and that they improperly used company funds for personal benefit, causing the company to incur substantial debts.

The Court found that the financial statements of Tech Voice clearly indicated that the directors, particularly Mr. and Ms. Ovenden, had drawn money from the company for personal use. These transactions were not properly characterised as salary or wages, and there was no evidence that they were at fair value. The Court held that Mr. Ovenden was liable for $98,338.00, Ms. Ovenden for $41,477.00, and Mr. Wohnsiedler for $32,844.00, each sum plus interest.

Regarding breaches of directors' duties, the Court found that the directors failed to act in good faith and in the best interests of the company, particularly by continuing to trade despite clear financial difficulties and using company funds for personal benefit. The Court held that the directors breached their duties under sections 131(1), 133, 135, and 137 of the Companies Act 1993. For these breaches, Mr. Ovenden was ordered to pay $203,468.00 and Ms. Ovenden $162,886.69, both sums including interest from the date of liquidation to the date of judgment. Costs for these orders were set on a 2B basis, and leave was reserved for reference back to the Court if necessary.

Orders