FINNIGAN v ELLIS [2018] NZHC 1146

FINNIGAN v ELLIS [2018] NZHC 1146

Court found defendants breached ss135, 136 and 137: Black was a shadow and at times de facto director; Ellis, despite a purported resignation, continued to act as a de facto director; directors traded recklessly, agreed to obligations without reasonable grounds and failed to exercise requisite care; as consequence defendants ordered jointly and severally to contribute the liquidators' proved principal of $765,692.81 plus interest; specified general security agreements set aside under s294(5).

Citation
[2018] NZHC 1146
Parties
Plaintiff Liquidator: Peri Micaela Finnigan; Plaintiff Liquidator: Boris van Delden; First Defendant De Jure Director (also Alleged De Facto/shadow Director): Brian Robert Ellis; Second Defendant De Jure Director: Gerald Norman Williams; Third Defendant De Facto and Shadow Director (allegation): James Neil Black
Court
High Court
Jurisdiction
New Zealand
Judgment Date
22 May 2018
Procedural Posture
Application Under S 301 Companies Act 1993 (liquidation) / Judgment After Trial (high Court)
Outcome
Judgment for plaintiffs (liquidators). Defendants liable under s301 for contribution in respect of breaches of directors' duties; certain securities set aside under s294(5).
Legal Topics
Directors' Duties, Reckless Trading S135, Duty as to Obligations S136, Duty of Care S137, S301 Contribution Claims, Shadow and De Facto Directors, S294(5) Setting Aside Security
Company Law Insolvency Law Civil Procedure Directors' Duties Reckless Trading S135 Duty as to Obligations S136 Duty of Care S137 S301 Contribution Claims +2 more

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Parties

Peri Micaela Finnigan

Plaintiff Liquidator

Boris van Delden

Plaintiff Liquidator

Brian Robert Ellis

First Defendant De Jure Director (also Alleged De Facto/shadow Director)

Gerald Norman Williams

Second Defendant De Jure Director

James Neil Black

Third Defendant De Facto and Shadow Director (allegation)

Procedural Posture

Application Under S 301 Companies Act 1993 (liquidation) / Judgment After Trial (high Court)

Legal Issues

  1. 1 Whether J N Black was a de facto and/or shadow director
  2. 2 Whether B R Ellis, having purported to resign 6 April 2012, remained a de facto and/or shadow director
  3. 3 Whether directors traded recklessly in breach of s135 Companies Act 1993

Ratio Decidendi

Court found defendants breached ss135, 136 and 137: Black was a shadow and at times de facto director; Ellis, despite a purported resignation, continued to act as a de facto director; directors traded recklessly, agreed to obligations without reasonable grounds and failed to exercise requisite care; as consequence defendants ordered jointly and severally to contribute the liquidators' proved principal of $765,692.81 plus interest; specified general security agreements set aside under s294(5).

Court Disposition

Judgment for plaintiffs (liquidators). Defendants liable under s301 for contribution in respect of breaches of directors' duties; certain securities set aside under s294(5).

Orders

  • Order setting aside under Companies Act 1993 s294(5) the general security agreement granted by Wenztro to ASB (25 March 2011) and the general security agreement granted to Ellis (25 March 2012)
  • Order that defendants Brian Robert Ellis, Gerald Norman Williams and James Neil Black are jointly and severally liable to contribute NZD 765692.81 to the assets of Wenztro Co‑operation Ltd (in liquidation)