SYNTAX HOLDINGS (AUCKLAND) LTD (IN LIQUIDATION) v BISHOP [2013] NZHC 2171

SYNTAX HOLDINGS (AUCKLAND) LTD (IN LIQUIDATION) v BISHOP [2013] NZHC 2171

From 1 April 2009 the directors (the Bishops) ought to have known tax liabilities could not be met and nonetheless permitted the company to incur obligations; applying s135/s136 the Court found liability for reckless trading/agreement to incur obligations without reasonable grounds; quantum calculated by excluding pre-1 April 2009 creditor base, subtracting recoveries from voidable transactions, allowing a 20% benefit to directors and awarding 80% of the remaining loss, resulting in judgment for $240,000 plus interest and costs.

Citation
[2013] NZHC 2171
Parties
First Plaintiff: Syntax Holdings (Auckland) Ltd (in Liquidation); Second Plaintiff: Vivien Judith Madsen-Ries and Henry David Levin, as liquidators of Syntax Holdings (Auckland) Ltd (in Liquidation); First Defendant: Florence Gale Bishop; Second Defendant: Donald Patrick Bishop
Court
High Court
Jurisdiction
New Zealand
Judgment Date
26 August 2013
Procedural Posture
Liquidation Proceeding Under the Companies Act 1993 / Judgment (oral Hearing) Formal Proof
Outcome
Judgment entered for plaintiffs (liquidators) against Florence Gale Bishop and Donald Patrick Bishop jointly and severally for $240,000; interest from date of liquidation to September 2011 at rate prescribed by s87 Judicature Act 1908; costs to plaintiffs on a 2B basis and reasonable disbursements to be fixed by the...
Legal Topics
Directors' Duties, Reckless Trading, Voidable/undue Preferences, Restitution Under S301 Companies Act, Tax Liabilities (gst, Paye)
Company Law Insolvency Law Civil Procedure Directors' Duties Reckless Trading Voidable/undue Preferences Restitution Under S301 Companies Act Tax Liabilities (gst, Paye)

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Parties

Syntax Holdings (Auckland) Ltd (in Liquidation)

First Plaintiff

Vivien Judith Madsen-Ries and Henry David Levin, as liquidators of Syntax Holdings (Auckland) Ltd (in Liquidation)

Second Plaintiff

Florence Gale Bishop

First Defendant

Donald Patrick Bishop

Second Defendant

Procedural Posture

Liquidation Proceeding Under the Companies Act 1993 / Judgment (oral Hearing) Formal Proof

Legal Issues

  1. 1 Whether directors carried on the company's business in a manner likely to create a substantial risk of serious loss to creditors (s135 Companies Act 1993)
  2. 2 Whether directors agreed to incur obligations without reasonable grounds to believe the company could perform them (s136 Companies Act 1993)
  3. 3 Assessment of quantum for breach of directors' duties and appropriate restitution under s301 Companies Act 1993

Ratio Decidendi

From 1 April 2009 the directors (the Bishops) ought to have known tax liabilities could not be met and nonetheless permitted the company to incur obligations; applying s135/s136 the Court found liability for reckless trading/agreement to incur obligations without reasonable grounds; quantum calculated by excluding pre-1 April 2009 creditor base, subtracting recoveries from voidable transactions, allowing a 20% benefit to directors and awarding 80% of the remaining loss, resulting in judgment for $240,000 plus interest and costs.

Court Disposition

Judgment entered for plaintiffs (liquidators) against Florence Gale Bishop and Donald Patrick Bishop jointly and severally for $240,000; interest from date of liquidation to September 2011 at rate prescribed by s87 Judicature Act 1908; costs to plaintiffs on a 2B basis and reasonable disbursements to be fixed by the...

Orders

  • Judgment for plaintiffs against defendants joint and several in the sum of NZD 240000
  • Interest to run on NZD 240000 from date of liquidation to September 2011 at the rate prescribed from time to time by s87 of the Judicature Act 1908