CGES LIMITED (IN LIQUIDATION AND RECEIVERSHIP) v KELLY [2016] NZHC 1465

CGES LIMITED (IN LIQUIDATION AND RECEIVERSHIP) v KELLY [2016] NZHC 1465

Directors knowingly allowed the company to trade while insolvent, made personal withdrawals and failed to meet tax obligations, thereby breaching duties under ss 131,135,136 and 137; as a result they are jointly and severally liable to repay the overdrawn shareholder current accounts ($262,073) and to contribute to the company's losses under s 301 ($301,256); interest and costs follow.

Citation
[2016] NZHC 1465
Parties
First Plaintiff: CGES Limited (in liquidation and receivership); Second Plaintiff: Vivien Judith Madsen-Ries; Third Plaintiff: Henry David Levin; First Defendant: Mark Stephen Kelly; Second Defendant: Donna Anne Marie Kelly
Court
High Court
Jurisdiction
New Zealand
Judgment Date
30 June 2016
Procedural Posture
Company Liquidation Claims Under Companies Act 1993 (s 301, Directors' Duties) / Undefended Hearing (default Judgment Hearing)
Outcome
Judgment entered for plaintiffs against defendants (default judgment). Defendants jointly and severally liable.
Legal Topics
Directors' Duties, Reckless Trading, Shareholder Current Accounts, Statutory Trust for Paye/gst, S 301 Remedies, Default Judgment
Company Law Insolvency Law Tax Law Civil Procedure Directors' Duties Reckless Trading Shareholder Current Accounts Statutory Trust for Paye/gst +2 more

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Parties

CGES Limited (in liquidation and receivership)

First Plaintiff

Vivien Judith Madsen-Ries

Second Plaintiff

Henry David Levin

Third Plaintiff

Mark Stephen Kelly

First Defendant

Donna Anne Marie Kelly

Second Defendant

Procedural Posture

Company Liquidation Claims Under Companies Act 1993 (s 301, Directors' Duties) / Undefended Hearing (default Judgment Hearing)

Legal Issues

  1. 1 Whether shareholders' overdrawn current accounts are recoverable as debts on demand
  2. 2 Whether the directors breached duties under ss 131, 135, 136 and 137 of the Companies Act 1993
  3. 3 Whether s 301 relief should be awarded and how to quantify it (causation, culpability, duration)

Ratio Decidendi

Directors knowingly allowed the company to trade while insolvent, made personal withdrawals and failed to meet tax obligations, thereby breaching duties under ss 131,135,136 and 137; as a result they are jointly and severally liable to repay the overdrawn shareholder current accounts ($262,073) and to contribute to the company's losses under s 301 ($301,256); interest and costs follow.

Court Disposition

Judgment entered for plaintiffs against defendants (default judgment). Defendants jointly and severally liable.

Orders

  • Judgment for plaintiffs for $262,073 on the shareholders' current account debt, joint and several against the defendants
  • Judgment under Companies Act 1993 s 301 for contribution of $301,256, joint and several against the defendants