BARRING HORTICULTURE NEW ZEALAND LTD (IN LIQ) v BARRING & ANOR [2016] NZHC 304 [9 March 2016]

BARRING HORTICULTURE NEW ZEALAND LTD (IN LIQ) v BARRING & ANOR [2016] NZHC 304 [9 March 2016]

Where a director caused or permitted a company to make advances while insolvent, those advances are recoverable as debts where they are unsupported by contractual terms or company authorisation; a related company is likewise liable for advances received without consideration or terms; where breaches of ss 131, 135...

Source-derived case information.

Citation
[2016] NZCCLR 17
Parties
First Plaintiff: Barring Horticulture New Zealand Ltd (In Liquidation); Second Plaintiffs: Henry David Levin and Vivien Judith Madsen-Ries (liquidators); First Defendant: Amarjit Singh Barring; Second Defendant: Barring Brothers Limited
Court
High Court
Jurisdiction
New Zealand
Judgment Date
9 March 2016
Procedural Posture
Liquidation Proceeding Under the Companies Act 1993 / Final Judgment (high Court)
Outcome
Judgment for plaintiffs; monetary judgments and declaration made against defendants and costs awarded
Legal Topics
Current Account Debt, Transactions at Undervalue / Inadequate Consideration (ss 297/298), Wrongful Trading / Trading While Insolvent, Compensation Under Ss 300/301, Liability of Related Parties for Advances, Undefended Judgment / Strike Out
Company Law Insolvency Law Directors' Duties Civil Procedure Current Account Debt Transactions at Undervalue / Inadequate Consideration (ss 297/298) Wrongful Trading / Trading While Insolvent Compensation Under Ss 300/301 +2 more

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Parties

Barring Horticulture New Zealand Ltd (In Liquidation)

First Plaintiff

Henry David Levin and Vivien Judith Madsen-Ries (liquidators)

Second Plaintiffs

Amarjit Singh Barring

First Defendant

Barring Brothers Limited

Second Defendant

Procedural Posture

Liquidation Proceeding Under the Companies Act 1993 / Final Judgment (high Court)

Legal Issues

  1. 1 Whether sums recorded on the director's current account are recoverable as debts repayable on demand
  2. 2 Whether advances made to a related company were transactions at an undervalue or otherwise repayable on demand
  3. 3 Whether the director breached duties in ss 131, 135 and 136 of the Companies Act 1993 and is liable to compensate the company/creditors

Ratio Decidendi

Where a director caused or permitted a company to make advances while insolvent, those advances are recoverable as debts where they are unsupported by contractual terms or company authorisation; a related company is likewise liable for advances received without consideration or terms; where breaches of ss 131, 135 and 136 caused creditor loss, the director is liable to compensate the company/creditors and compensation equal to creditor losses may be awarded after assessing causation, culpability and duration.

Court Disposition

Judgment for plaintiffs; monetary judgments and declaration made against defendants and costs awarded

Orders

  • Judgment for first plaintiff against first defendant for $413,463 plus interest from date of demand 5 March 2014 to date of judgment
  • Judgment for first plaintiff against second defendant for $144,370.62 plus interest from date of demand 5 March 2014 to date of judgment