New Zealand Case Law: Decisions & Judgments

Topic

Reckless trading (s135)

Legal area

Court

29 Sept 2023

JI v DING [2023] NZHC 2730

Citation

[2023] NZHC 2730
Court

High Court

The director breached s135 by permitting the company to accept purchase funds without securing discharge of the registered mortgage, thereby creating a substantial risk of serious loss to creditors, and breached s136 by lacking reasonable grounds to believe the company could perform its obligation to convey clear title; under s301 the court ordered repayment to the creditor and granted summary judgment where no defence was advanced.
24 Sept 2020

VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN AS LIQUIDATORS OF DEBUT HOMES LIMITED (IN LIQUIDATION) v LEONARD WAYNE COOPER [2020] NZSC 100

Citation

[2020] NZSC 100
Court

Supreme Court

Where a director knowingly continues trading while the company is insolvent and with certainty of a substantial GST shortfall, and agrees to incur obligations he knows cannot be met, the director breaches ss135 and 136 and, where he fails to consider the interests of all creditors and acts in conflict to prefer secured/related-party interests, breaches s131; s138 did not excuse reliance on generalized advice; related-party security can be set aside under s299 to the extent necessary to prevent frustrative return of compensation; appropriate relief under s301 is restitutionary/compensatory tai…
24 Jul 2018

FBB HOLDINGS LIMITED (in liquidation) v MCGRATH [2018] NZHC 1786

Citation

[2018] NZHC 1786
Court

High Court

The application for summary judgment was dismissed because the plaintiffs failed to discharge the burden of showing the defendant had no defence; there remained real doubt and uncertainty about the accuracy and completeness of the company's records as at the date of liquidation (records after 31 March 2015 unauthenticated and relevant material not produced) and the disputed adjustments could not be resolved on summary judgment without discovery.
20 Oct 2017

ANGELA CLAIRE SHAW AND IAN ALEXANDER SHAW v COLIN DAVID OWENS AND DAVID STUART VANCE AS THE LIQUIDATORS OF ALUMINIUM PLUS WELLINGTON LIMITED [2017] NZSC 160

Citation

[2017] NZSC 160
Court

Supreme Court

The Supreme Court granted a short extension of time but dismissed leave to appeal because the issues were fact-specific, the Court of Appeal's finding that the directors breached duties by releasing the Trust's obligations (thereby rendering Aluminium Plus insolvent) was open on the evidence, and there was no matter of general or commercial importance nor a risk of miscarriage of justice warranting further appeal.
4 Nov 2016

OWENS AND VANCE v COLEMAN [2016] NZHC 2644

Citation

[2016] NZHC 2644
Court

High Court

The court held that on the available evidence Mr Coleman must repay the overdrawn director account ($51,886.59) and the $86,575 paid to Guyon Holdings Ltd (including the alter‑ego finding); the defendant breached s137 in relation to tax obligations and must personally compensate the company for the IRD liability of $243,555.75. The court declined to determine the broader s301 claims for the full creditor shortfall and liquidators' costs until plaintiffs file further evidence (including expert opinion) to establish with specificity the point of insolvency, causal nexus and quantum; plaintiffs…
4 Oct 2016

WHISK DELI CO LTD (IN LIQ) v WILLIAMS [2016] NZHC 2345

Citation

[2016] NZHC 2345
Court

High Court

By 31 August 2012 Ms Williams had sufficient information (ongoing failures to pay PAYE and GST and lack of funds) to make the required sober assessment; continuing to trade thereafter breached ss135 and 136; Mr Paulsen remained a de jure director until early 2015 and, by inaction, also breached ss135 and 136; losses caused by the breaches were assessed at $81,837.51 and defendants are jointly and severally liable for that sum plus interest and costs.
8 Apr 2016

MADSEN-RIES AND VANCE AS LIQUIDATORS OF PETRANZ LTD (IN LIQ) v PETERA [2016] NZCA 103

Citation

[2016] NZCA 103
Court

Court of Appeal

The Court held that s161 requires fairness as between directors/shareholders and the company and does not import creditor interests; therefore directors need not consider creditor interests when certifying fairness under s161, and creditor protection is provided by the solvency regime and duties such as s135/s301; on the facts Lang J correctly found the salaries fair to the company (full value provided and PAYE paid) and made no legal error.
12 Feb 2016

CENTRAL TYRES WAIPUKURAU LTD (IN LIQUIDATION) & ORS v PALLESEN & ORS [2016] NZHC 146

Citation

[2016] NZHC 146
Court

High Court

Pallesen breached s194 by failing to keep adequate accounting records, and that failure materially contributed to CTWL's inability to pay its debts and substantially impeded the liquidation; Pallesen also breached s135 (reckless trading from January 2013) and s137 (lack of adequate care/diligence). Therefore the Court declared him personally liable under s300 for unpaid creditors and ordered contributions under s301 for the quantified losses and liquidators' unpaid costs; repayment of the overdrawn director current account with prescribed interest was also ordered.
24 Sept 2015

CENTRAL TYRES WAIPUKURAU LIMITED (IN LIQUIDATION) & ORS v PALLESEN & ORS [2015] NZHC 2324

Citation

[2015] NZHC 2324
Court

High Court

On the evidence and sworn interview, the liquidators demonstrated a good arguable case of breaches of ss135,137 and s194 and potential personal liability under ss300/301, identified assets in the director's name and a recent suspicious transfer indicating a real risk of dissipation; accordingly a without‑notice freezing order was necessary in the interests of justice and was granted.
5 Aug 2015

GRANT v BROWN [2015] NZHC 1846

Citation

[2015] NZHC 1846
Court

High Court

Brown knowingly continued the company trading while insolvent, authorised and requested legal services on credit without reasonable grounds to believe the company could pay, thereby breaching ss135 and 136; causation established between those breaches and the creditor loss, so under s301 Brown must contribute the full creditor debt of $29,532.36 and liquidators' costs $14,067.93; costs of the proceeding ordered against him on a category 2B basis.