New Zealand Case Law: Decisions & Judgments

Topic

Misapplication of company funds

Legal area

Court

15 Nov 2017

FAF HOLDINGS LIMITED (IN LIQ) v BETHUNE [2017] NZHC 2796

Citation

[2017] NZHC 2796
Court

High Court

Defendant breached duties under ss 131, 135, 136 and 137 by prioritising Town Ball's and his own interests over FAF, failing to terminate or enforce contractual obligations, allowing Inland Revenue liabilities to accrue while FAF was insolvent and failing to make proper enquiries or act reasonably; related party claim was time-barred; appropriate remedy under s301 was contribution of $538,213.28 to company assets to compensate for Inland Revenue debt.
7 Jul 2017

DHC ASSETS LIMITED v ARNERICH [2017] NZHC 1460

Citation

[2017] NZHC 1460
Court

High Court

Summary judgment was declined because the defendant established a tenable defence that material factual issues exist — notably whether Vaco acquired the land and liabilities beneficially or as trustee (meaning proceeds were not company assets) and whether the retentions were properly payable — such that there is a real question to be tried and the matter requires full hearing.
11 Jul 2016

M J PIDGEON BUILDER LIMITED (IN LIQ) & ANOR v PIDGEON [2016] NZHC 1566

Citation

[2016] NZHC 1566
Court

High Court

Where a sole director knowingly permitted a company that was insolvent (or had no realistic prospect of solvency) to continue trading, incur further tax liabilities and draw funds, he breached ss131,135,136 and137; causation, culpability and duration supported ordering compensation under s301 for losses caused from the date it was no longer reasonable to trade (here fixed as 1 April 2012) and the director was ordered to pay the proved shortfall (NZD 165,661.81) plus interest and costs.
8 Dec 2015

A & N CONTRACTORS (2009) LIMITED (IN LIQUIDATION) v LEVIN AND MADSEN-RIES AS LIQUIDATORS OF A & N CONTRACTORS (2009) LIMITED (IN LIQUIDATION) [2015] NZHC 3091

Citation

[2015] NZHC 3091
Court

High Court

The court found the payments were personal drawings on a joint shareholder current account repayable on demand amounting to $294,231.68; the company was insolvent from at least 1 July 2010; the sole director continued trading while insolvent and allowed drawings, thereby breaching duties in ss 131, 135 and 136 and failing accounting duties, causally contributing to creditor losses; accordingly the company recovered the current account debt from both defendants and the court ordered the director under s 301 to contribute the full creditor loss of $258,810.24 plus interest from the date of liqu…
4 Jun 2015

SPARTA13 CONTRACTORS LIMITED v MOEKE [2015] NZHC 1222

Citation

[2015] NZHC 1222
Court

High Court

Defendants, as past directors, misapplied company funds and are ordered under s301 to repay the money taken; compensation under s301 is limited to losses caused beyond mere debtor-creditor debts (notably interest/penalties and liquidation costs); s300 was not engaged because record-keeping failures were not the primary cause of insolvency, and double recovery must be avoided.
26 May 2015

SHANNON AGRICULTURAL CONSULTING LIMITED (In liquidation) & ORS v SHANNON & ANOR [2015] NZHC 1133

Citation

[2015] NZHC 1133
Court

High Court

On the uncontradicted evidence the defendants, as sole directors, misapplied company funds and breached statutory duties from at least 31 January 2009; the misapplication caused creditor losses and unjust enrichment by reducing the defendants' mortgage debt; equitable tracing supports a constructive trust in favour of the company for $76,534; compensation under s301 for creditor losses of $302,718.16 and recovery of current account drawings (net of mortgage payments) are appropriate; judgment for plaintiffs for the aggregated sums with interest and costs was ordered.
24 Mar 2014

SCHULER V GRANT AND KHOV AS LIQUIDATORS OF INDEPENDENT LIVESTOCK AGENTS LIMITED (IN LIQUIDATION) CA27/2013 [2014] NZCA 91

Citation

[2014] NZCA 91
Court

Court of Appeal

Given Potter J's unchallenged findings that Schuler deliberately misrepresented to creditors and applied proceeds due to the Mudges to IL Agents' business so the funds were misapplied and no longer available at liquidation, those facts established breaches of statutory duties (s 131) and justified relief under s 301 requiring account to the liquidators for the net proceeds; the appeal lacked merit and is dismissed.
21 Sept 2011

VICTORIA STREET APARMENTS LTD (IN LIQUIDATION) and ANOR v SHARMA and ORS HC AK CIV-2009-404-008377

Citation

openlaw-9b000dc7_44d9_4731_af92_b94f1a927308.pdf
Court

High Court

The Court held that Mr Sharma, as the company's directing mind and privy to the arbitration, was estopped from denying the Otis and Treasury GST debts; he knowingly misapplied VSAL funds to benefit himself and associated entities while VSAL was insolvent or near-insolvent, thereby breaching fiduciary duties and constituting equitable fraud; the Limitation Act defence failed because s28 postponed the limitation period for equitable fraud; plaintiffs proven entitled to recover misapplied funds and to pursue equitable remedies, with quantification and ancillary relief reserved.