New Zealand Case Law: Decisions & Judgments

Topic

Compensation under s301

Legal area

Court

2 Jul 2021

KELSTWORURAL LTD (IN LIQUIDATION) v MOUNSEY-ROSS [2021] NZHC 1632

Citation

[2021] NZHC 1632
Court

High Court

Directors breached duties under ss131,135 and137 by persistently trading while insolvent, failing to remit tax, appropriating sale proceeds and extracting substantial drawings; s136 was not engaged on the facts; those breaches caused the company's unmet tax liabilities and insolvency and, under s301, the directors must contribute to the company's assets in an amount equal to the company's loss caused by their breaches; accordingly defendants jointly and severally ordered to contribute $609,738.74 plus interest.
17 Nov 2020

WATTS & HUGHES CONSTRUCTION LIMITED v BIALA [2020] NZHC 3041

Citation

[2020] NZHC 3041
Court

High Court

The director did not breach s135. The decisions to commence the start-up and to continue trading were reasonable given available financing, shareholder support and ordinary start-up risks; the plaintiff's claimed loss was uncertain and, in any event, not 'serious' as required by s135, so no compensation under s301 was ordered.
7 Feb 2019

OFFICIAL ASSIGNEE v HARMAN [2019] NZHC 101

Citation

[2019] NZHC 101
Court

High Court

Court accepted joint recommendation and evidential analysis: insolvency date of pooled companies fixed at 31 March 2007; accepted starting deterioration of $10,853,548.15 (loans after that date less interim distributions); reduced that figure by $671,721.43 to remove mutual creditor double recovery and by $1,000,000 for uncertainties; applied 70% culpability to remaining $9,181,826.72 to assess director's liability; determined admitted claim under s252 to be $6,427,000 and made no order for costs.
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.
2 Jun 2017

MCKAY BUILDERS LTD (IN LIQ) v MCKAY [2017] NZHC 1202

Citation

[2017] NZHC 1202
Court

High Court

The retrospective journal entries were paper transactions without legal effect or equivalent value that artificially converted a company asset into a liability; the company was insolvent from at least 30 November 2009; related-party set-off was unavailable; the sole director breached statutory and fiduciary duties by permitting wrongful trading, incurring unpayable tax obligations, allowing the fictitious journals, and failing to keep proper records; accordingly the shareholders owe $293,129, the director must compensate the company for creditor losses of $306,548.43 and current account loss…
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.
29 Apr 2016

DAMIEN GRANT AND STEVEN KHOV AS LIQUIDATORS OF NZNET INTERNET SERVICES LIMITED (IN LIQUIDATION) V ROWAN KENLEY JOHNSTON [2016] NZCA 157

Citation

[2016] NZCA 157
Court

Court of Appeal

The appeal is dismissed. The Court held Johnston did not breach duties from appointment or mid‑2010 because he had undertaken reasonable due diligence, injected funds and took remedial steps; he did breach s137 (duty of care) from about 31 December 2010 (and Brown J's findings of later breaches were largely accepted) but the court declined to order compensation under s301 because causation and primary culpability lay with Andrews, Johnston's substantial advances offset deterioration, and fairness and proportionality did not support a contribution order.
7 Apr 2016

TAJ CONSTRUCTION LTD (IN LIQUIDATION) v OWENS AND VANCE, AS LIQUIDATORS OF TAJ CONSTRUCTION LTD (IN LIQUIDATION) [2016] NZHC 584

Citation

[2016] NZHC 584
Court

High Court

Bank records established that the transactions were personal drawings repayable as advances on the shareholder's current account producing a debt of $262,318.87; mortgage payments of $20,828.04 from company funds were a misapplication in breach of fiduciary duty and are held on constructive trust for the company; no further consideration of the s301 compensation claim was required given the primary remedies.
4 Jun 2015

MADSEN-RIES & ORS v CANDY [2015] NZHC 1229

Citation

[2015] NZHC 1229
Court

High Court

The defendant, as sole director and shareholder, knowingly continued to withdraw company funds totalling $311,810.49 while the company was insolvent from at least the 2007 financial year, thereby breaching directors' duties under s131 and s135; the court entered default judgment for the overdrawn account of $311,810.49 plus interest and ordered the defendant to contribute by way of compensation $205,754.28 (the Commissioner’s proved claim and petition costs) plus interest, together with costs to the plaintiffs.
2 Jun 2015

VANCE v JEFFERYS [2015] NZHC 1202

Citation

[2015] NZHC 1202
Court

High Court

The Court found Mr Jefferys breached s136 by incurring GST obligations without reasonable grounds to believe Brooklyn Rise could meet them; Spinnaker was not a shadow director on the material before the Court; under s301 the appropriate compensation was fixed at $165,000 (80% of the two later unpaid GST liabilities) and costs awarded on a 2B basis for one hour.