Mizeen Painters Limited (in liquidation) v Tapusoa [2015] NZHC 826 (28 April 2015)

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UNDER	the Companies Act 1993
BETWEEN	MIZEEN PAINTERS LMITED (IN LIQUIDATION) First Plaintiff VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN as liquidators of MIZEEN PAINTERS LIMITED (IN LIQUIDATION Second Plaintiffs
AND	MISIMOA TAPUSOA First Defendant ENELEATA TAPUSOA Second Defendant

Hearing:	15 April 2015
Appearances:	K M Wakelin and J A O'Connell for the Plaintiff R K Nand for the Respondent
_Judgment:	_{28 April 2015}

This judgment was delivered by me on Tuesday 28 April 2015 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.

MIZEEN PAINTERS LMITED (IN LIQUIDATION) v TAPUSOA [2015] NZHC 826 [28 April 2015]

[1] Mizeen Painters Ltd was incorporated on 9 February 2010, ceased trading in February 2014 and was placed into liquidation on 28 February 2014 on the application of the Inland Revenue. The second plaintiffs were appointed as liquidators.

(a) A claim for amounts owed by the defendants on their overdrawn current accounts;

(b) In the alternative to that cause of action, a claim that amounts taken by the defendants from the company were either transactions at an undervalue under s 297 of the Companies Act 1993 (“the Act”) or were for inadequate consideration under s 298 of the Act;

(c) A claim under s 300 of the Act relating to the defendants’ failure to keep adequate accounting records for the company as required by s 194 of the Act; and

(d) A claim to compensation under s 301 of the Act for breaches of duties imposed on the directors under s 131(1) (obligation to act in good faith and in best interests of the company), s 135 (obligation not to carry on the business of the company in a manner that creates substantial risk of loss to creditors), and s 136 (obligation not to continue trading notwithstanding absence of reasonable grounds for belief the company would be able to meet its obligations).

[4] The plaintiffs filed this proceeding on 28 October 2014 and it was served on the defendants on 22 November 2014.

[5] Any statement of defence was due to be filed and served by 19 January 2015. No such defence having been filed, Ellis J directed on 22 January 2015 that the matter be set down for a formal proof hearing as requested by the plaintiffs. In accordance with the requirements of r 15.9(4), the plaintiffs have filed affidavit evidence of the liquidator, Mr Levin, in support of their seven (two alternative) causes of action.

[6] The onus is on the plaintiffs to satisfy the Court that judgment should be entered against the two defendants.

[7] At the hearing of the matter, Mr Nand appeared for the defendants. He had only recently been instructed and sought an adjournment of the proceeding to enable settlement discussions. That was opposed by the plaintiffs. No application for leave to file a statement of defence out of time had been filed pursuant to r 15.9, nor an affidavit deposing to any substantial ground of defence or the reasons for the delay. Indeed, Mr Nand candidly acknowledged that the plaintiffs had established clear breaches of the Companies Act.

[9] During its brief trading history, the company incurred significant debts to creditors that remained outstanding at liquidation. These included a claim by Inland Revenue which has been admitted by the liquidators to the extent of $58,075.12. The company is also indebted to Dulux Group (NZ) Pty Ltd for $2,223.57.

[10] The company’s only assets, apart from a nominal bank account balance and a

small trade creditor, were the defendants’ current account and the liquidators’ claims.

[11] That current account has been calculated by the liquidator at $351,096, being funds withdrawn by the defendants during the course of the company’s trading history.

[12] Although financial statements were prepared for the company for the financial years ending 31 March 2010, 2011 and 2012, no accompanying general ledgers were provided to the liquidators. The balances recorded in the company’s financial statements could not therefore be verified and, as Mr Levin deposes, were not a reliable starting point for calculation of the shareholder current account balances at liquidation.

[13] In the absence of proper accounting records, the liquidators were required to reconstruct the financial position of the company using as their starting point the company’s bank statements.

[14] Based on these records, the plaintiffs submit that the company was insolvent from at least 31 January 2011 when it became unable to pay its debts as they became due in the normal course of business.

[15] Mr Levin identifies that the company first defaulted on its GST obligations in the period ending 31 January 2011. From the period ending 31 May 2011 through to November 2013, no GST payments were made and interest and penalties accrued.

[16] The company also began defaulting on its PAYE obligations early in its trading history – the first default being for the period ending 31 August 2011. From that date Mr Levin deposes that the company had frequently defaulted in its obligations up to the period ending 30 September 2013 with the accrual of substantial interest and penalties.

[17] The company also incurred a penalty for defaulting on its income tax obligations for the period ending 31 March 2011, 31 March 2012 and 31 March

[18] Mr Levin identifies a key reason for the company’s failure to meet its tax debts as being the fact that its funds were consistently stripped by the defendants for personal expenses in priority to applying them to the company’s creditors. In simple terms, the defendants advanced their personal interests over those of the company.

[19] The plaintiffs submit that, to the extent the funds taken by the defendants gave rise to a debt owed to the company, it had no practical value and that it was unable to be realised to meet the company’s due debts.

[20] Mr Levin deposes that, based on his experience, a failure to pay PAYE and GST on a regular basis is a sure sign of a company in trouble and that businesses with cashflow problems are often tempted to defer their tax liabilities, since Inland Revenue, unlike trade creditors or company employees, cannot withhold services and materials required to continue in trade.

[21] In the circumstances, Mr Levin’s evidence is that the company did not have sufficient available assets to pay its debts as they became due in the ordinary course of business from at least 31 January 2011 and thereafter to the date of liquidation. I accept that evidence. In my view the company was insolvent from at least

31 January 2011 as a result, primarily, of the amounts which the defendants drew on it by way of personal expenses.

[22] From its review of the bank statements, the plaintiffs identified the following advances made by the company to the defendants:

Description	Amount
Expenses, personal in nature	53,003
ATM withdrawals	53,680
Dorchester Finance	2,883
Branch teller transactions	275,126
BNZ Life	7,505
Less net wages	41,100
Total	$351,096

[23] Mr Levin outlines in detail why these transactions were inconsistent with the business expenditure of the company and why they were considered for the personal benefit of the defendants. It is clear from the schedules that he annexes that the defendants simply regarded the company’s account as their personal account, using it for almost every conceivable type of personal expenditure.

[24] Generally, advances made by a company to its shareholders are debts owed by the shareholders to the company and repayable on demand.¹

[25] In the absence of an explanation, drawings must be treated as advances from the company to the shareholders that are repayable on demand. They remain as repayable advances unless and until a company resolution classifies them otherwise. When the company’s accounting records provide no explanation for the drawings in the shareholders current account, they must be treated as advances from the company to the shareholders.²The onus is on the defendants as directors and fiduciaries of the company to account to it for funds and establish the legitimacy of any funds taken from the company; in other words, to explain what has become of company property in their hands.³

[26] Mr Levin outlines in detail why the transactions do not compromise salary or wage payments to the defendants or employees of the company based on its records. There is no evidence of any written employment agreement between the company and the defendants as required by s 65 of the Employment Relations Act 2000, nor was there compliance with the relevant statutory procedures under s 161 of the Act for the payment of salaries to a director. Further, there was no evidence of any written agreement by an entitled person under s 107 of the Act or solvency certificate from the board under s 108 of the Act such as to support an entitled person’s

_{agreement of the type necessary to remedy a lack of compliance with s
161. In any}

¹Thom Contractors (in liq) v Thom HC Auckland CIV-2008-404-6829, 28 April 2009; New Zealand Game Meats Exports Ltd (in liq) v Lau HC Whangarei CP34/98, 19 March 1999; Re Samarang Developments Ltd (in liq) HC Christchurch CIV-2003-409-2094, 30 September 2004 at [55].

³GHLM Trading Limited v Maroo [2012] EWHC 61 (Ch) at 143-149. This view was shared by the Court of Appeal in Morgenstern v Jeffreys [2014] NZCA 449 at [56] and [58].

event, those requirements could not have been complied with given the company’s

[27] I am satisfied, therefore, that the plaintiffs’ claim for recovery of advances totalling $351,096 is adequately proved. That sum is interest bearing from the date of demand, being 28 July 2014.

[28] It will be apparent that the amount of the outstanding advances exceeds by a significant sum the total outstanding debts of the company. Even when liquidators’ costs (including legal costs) are added, there is a substantial margin. I do not see this as an impediment to judgment in the amount specified. A similar issue confronted the Court of Appeal in Morgenstern v Jeffreys, albeit in the context of a s 301

Nor do we accept Mr Walker’s submission that the maximum amount payable under s 301 should be the loss suffered by the creditors. The problem with that approach is that it does not leave any funds to pay the respondents. We see no reason why Mr Morgenstern should not be ordered to pay the full $3,499,999 on the basis that, if there is a surplus in the liquidation, the money will be returned to him as the sole shareholder in any event.

[29] Likewise in this case, the defendants are the sole shareholders of the company. It is obvious that payment of the full amount of the advances would simply result in a “round robin” whereby a significant amount was immediately returned to them as shareholders. During the course of argument I received the assurance of counsel for the plaintiffs that it was not the liquidators’ intention to pursue judgment for any greater sum than was necessary to meet the company’s outstanding indebtedness and the costs of the liquidation (including legal costs). That is a practical matter which I accept is distinct from the underlying legal liabilities of the defendants.

[30] In brief submissions, which I allowed Mr Nand to make in relation to quantum he stated that some of the matters referred to as advances might, on further investigation, be properly categorised as business expenses. However, he accepted

_{that his criticisms were at the margins and that, having regard to the
quantum of total}

creditor claims and liquidation costs and to the matters referred to in paras [28] and

[31] These were, as indicated, pleaded in the alternative to the first cause of action and it is not necessary for me to consider them further.

Fourth cause of action – failure to act in good faith and in what the directors believed to be the best interests of the company – s 131(1)

[32] The plaintiffs plead that the defendants’ breached the duty provided for in

131 Duty of directors to act in good faith and in best interests of the company

(1) Subject to this section, a director of a company, when exercising powers or performing duties, must act in good faith and in what the director believes to be the best interests of the company.

[33] The duty is a subjective one. However, where it is inconceivable that a director with any appreciation of fiduciary responsibilities could cause a company to enter into a transaction, such director generally will be regarded as breaching his duty regardless of the subjective belief held.⁵

[34] In cases of doubtful solvency, that duty is also owed to the company’s creditors.⁶In Sojourner v Robb, Fogarty J at first instance reinforced the importance that directors pay careful attention to the interests of creditors, noting that:⁷

In this context, the standard in s 131 is an amalgam of objective standards as to how people of business might be expected to act, coupled with a subjective criterion as to whether the directors have done what they honestly believe to be right. The standard does not allow a director to discharge the duty by acting with a belief that what he is doing is in the best interest of the company, if that belief rests on a wholly inappropriate appreciation as to the interests of the company. If a director believes that the duty to act in the best

⁵Morrison’s Company Law (NZ) (online looseleaf ed, LexisNexis) at chapter 24.9 citing

⁶_{Nicholson v Permakraft (NZ) Ltd [1985] NZCA 15; [1985] 1 NZLR 242
(CA) at 249 per Cooke J.}

interests of the company is a duty always to act in the best interests of the shareholders, and never in the interests of the creditors, in a situation of doubt as to the solvency of the company, the director cannot be said to be acting in good faith. Creditors are persons to whom the company has ongoing obligations. The best interests of the company include the obligation to discharge those obligations before rewarding the shareholders.

[35] His Honour’s remarks could scarcely be more apposite to the present case. The defendants’ failed to ensure the company met its tax obligations as they became due and by doing so allowed the company to continue trading and incur further debts after it had become insolvent. The directors can be taken to have known of the company’s ever increasing debt to the Inland Revenue.

[36] That the company was unable to meet its tax obligations was directly attributable to the directors’ use of the company’s funds for personal benefit. Those funds included monies received on trust by the company (PAYE deductions and GST on services provided). The funds which the defendants took from the company would have been more than sufficient to meet its tax obligations. While the defendants continued to receive advances in preference to meeting the company’s debts, the company had no prospect of meeting its overdue debts let alone further debts that accrued. As a result the company and its creditors suffered increasing losses until it was ultimately placed into liquidation.

[37] I am satisfied that such loss was the direct result of the defendants’ failure to

[38] The plaintiffs argued that the defendants also breached the duty not to trade recklessly. Section 135 provides:

(a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or

(b) cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

[39] The plaintiffs must prove either subs (a) or (b). The duty in s 135 is owed by directors to the company, not to any particular creditor. The test is an objective one which focuses not on the director’s belief, but on the manner in which a company’s business is carried on and whether that modus operandi creates a substantial risk of

serious loss.⁸What is required when a company enters troubled waters is “sober

assessment” by the director on an ongoing basis as to the company’s likely future

[40] The duty contained in s 135 reflects a director’s fundamental duty to protect the interests of creditors when the company approaches insolvency. Recent applications of that principle occur in Sojourner v Robb, Boutique Tanneries Ltd (in liquidation) v Handley,⁹and Morgenstern. The Boutique Tanneries decision has many parallels with the present in that the Court formed the view that the director had operated the company in a very informal and relaxed way with scant regard to

formal requirements. It had been kept afloat for a number of years by paying all its creditors with the exception of Inland Revenue and it was Inland Revenue’s forbearance that prolonged the company’s trading. The Court accepted the deferral of tax obligations to Inland Revenue for any significant period reflected very poor business judgment.¹⁰Similar informality characterises the present case and likewise, the defendants failed to cause the company to meet its PAYE and GST obligations

for an extended period of time. During that period, the company exchanged its cash assets for a valueless current account or simply disposed of its cash assets for no value which was in the face of the company’s overdue and increasing tax debts. Notably, the sum of drawings taken by the defendants exceeded those tax debts. At no time did the defendants undertake the necessary “sober assessment” of the company’s position to prevent further loss to creditors.

⁹_{Boutique Tanneries Ltd (in liq) v Handley HC
Auckland CIV-2006-404-2713, 24 July 2008.}

Sixth cause of action – causing obligations to be incurred without believing the company could perform them – s 136 of the Act

[42] The plaintiff pleads that the defendants breached their duty under s 136, which provides:

A director of a company must not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

[43] In order to make out their claim against the directors, the plaintiffs have to establish two elements: firstly, that an obligation was incurred by the company and, secondly, that at the time of incurring the obligation, the defendant did not honestly believe on reasonable grounds that the company would be able to perform the obligation when it was required to do so.

[44] There is therefore a certain overlap between the breaches of directors’ duties contained in ss 135 and 136. The difference is, as Faire J pointed out in Bay Kiwifruit Contractors Ltd (in liq) v Ladher, that whereas s 135 focuses on directors engaging in a course of action, s 136 focuses on incurring specific obligations.¹¹

[45] In Fatupaito v Bates,¹²O’Regan J held that to establish a breach of s 136 the plaintiff must show that the defendant agreed to the company incurring an obligation at a time when he or she did not believe (a subjective test) on reasonable grounds (an objective test) that the company would be able to perform that obligation when required to do so.

Revenue that was incurred by a failure to pay GST and PAYE on time and the subsequent penalties and interest that accrued. I accept that there were no reasonable

¹¹_{Bay Kiwifruit Contractors Ltd (in liq) v Ladher
[2015] NZHC 63, 3 February 2015 at [46].}

grounds for the defendants to believe that the company would be able to meet these tax liabilities as they were incurred. Any assessment by the defendants was obliged to take into account the existing overdue debts which objectively represented a significant obstacle to paying new debts as they arose. Given the company’s insolvency and inability to meet its tax obligations after 31 January 2011 the defendants could not have believed on reasonable grounds that the company would be able to pay the entire amount to Inland Revenue when required to. The position is, in that respect, exactly the same as in Bay Kiwifruit Contractors Ltd.

[47] Section 194 specifies that the company must cause accounting records to be kept and specifies the information they must contain. In Maloc Construction Ltd (in liq) v Chadwick,¹³the Court held that the records must be such that they will, at any time, enable the financial position of the company to be determined without requiring explanation or reconstruction.

[48] In the present case, financial statements were prepared for the financial years ending 2010, 2011 and 2012. However, no general ledgers were maintained from which they could be verified, no cashbooks were provided to the liquidators, and no accounting software package appears to have been used to record the day-to-day transactions of the company. I am satisfied on Mr Levin’s evidence that a breach of s 194 has been clearly made out.

[49] This is governed by s 300 of the Act. The elements that the plaintiffs are required to establish in order to succeed on a claim under s 300 are:

¹³Maloc Construction Ltd (in liq) v Chadwick [1986] NZHC 102; (1986) 3 NZCLC 99,794 (HC).

(d) That the failure to comply has resulted in substantial uncertainty as to the company’s assets or liabilities, or has resulted in the liquidation being substantially impeded or is causally linked to the company’s insolvency.

[51] As to the fourth requirement, Mr Levin deposes that throughout the entire trading history of the company the absence of records has meant uncertainty as to its assets and liability position. He says that, as a result, the liquidators were required to reconstruct, from the limited source documents available, the company’s transactions during the relevant period and that this has substantially impeded the orderly liquidation of the company. In particular, he says that if accounts had been prepared, the liquidators could have relied on them in investigating and considering the company’s financial position. Instead, the liquidators were put to the cost and time of reconstructing that position. He points out that the defendants could not place any reasonable reliance on the company’s financial statements given, for example, that the statement of financial position as at 31 March 2012 showed no trade debtors, no bank account balance (positive or negative) and no tax debts due at all. Further, the balances recorded in the statement of financial position for the years ended 2010 and

2012 are identical. Clearly the financial statements, such as they were, were grossly inadequate. He notes that the absence of records had the immediate practical consequence that the defendants would have had difficulty in keeping track of the various imposts payable to the Inland Revenue and the fact that the company’s tax debts went unpaid consistently and for an extended period of time. To that extent, he says that the absence of adequate records can be causally linked to the company’s insolvency. I am satisfied that those conclusions are reliably drawn.

[52] On this aspect of the plaintiffs’ claim, I was advised during the course of the hearing of an amendment to quantum. The second plaintiffs sought to confine their recovery under this head to a contribution towards the liquidators’ accounting costs,

that contribution to reflect a fair apportionment for the time spent in reconstructing the company’s affairs. A supplementary affidavit has now been provided identifying attendances to the value of $9,951.90 (out of total attendances to the value of

[53] In Blanchett & Anor v Keshvara,¹⁴Venning J held, after finding that the defendant director had breached s 194 by failing to maintain adequate records, that this breach had substantially impeded the orderly liquidation of the company and accordingly found the director liable for a significant portion of a liquidator’s costs of administration, including wasted legal costs.

[54] I consider the liquidators’ claim under this head to be consistent with authority and to reflect the deterrent purpose of the section which, in turn, reflects the critical nature of adequate financial records if a company is not to be, as stated in Manning v Corry,¹⁵“flying blind “with officers, saying in the event of a crash” that they thought they had more altitude”.

[55] I accept therefore the claim in the amount of $9,951.90 No interest is claimed.

Section 301 of the Companies Act – relief in respect of breaches of ss 131(1), 135 and 136 of the Act

[56] I deal in this section of the judgment with appropriate relief for breaches of statutory duty other than the duty under s 194 to keep accounting records.

[57] Section 301 of the Act confers power on the Court to order a director to pay or restore money supplied or retained or to contribute such sums to the assets of the company by way of compensation as the Court thinks just. As noted by Lang J in Madsen-Ries vPetera ¹⁶the compensation must relate to the loss the company has

_{suffered as a result of the acts or omissions underpinning the relevant
breach of duty.}

¹⁴_{Blanchett & Anor v Keshvara [2011] NZHC 1106; (2011) 10 NZCLC
264,963 (HC).}

[58] As in that case, the culpability of Mr and Mrs Tapusoa has two distinct but inter-related aspects. Firstly they permitted the company to continue to trade for a period when they knew it could not meet its tax debts. Secondly they continued to use the company’s funds for their own purposes during that period when they could have used it to pay Inland Revenue.

[59] It is not, however, appropriate to compensate the company in respect of the use of its funds under the s 301 head. No such claim is made by the liquidators who bring a separate claim (the first cause of action) in respect of the funds used by Mr and Mrs Tapusoa for their own purposes. A further award under s 301 would, as it would have in Madsen-Ries v Petera, lead to the company being compensated twice in respect of the same loss.¹⁷

[60] Rather, the liquidators confine their claim under this head to the outstanding (admitted) creditor claims of $60,298.69 together with interest from the date of liquidation.

[61] I accept the liquidators’ submission that this claim is conceptually independent of a claim to the current account and is appropriately the subject of a separate award. The fact that the current account claim of itself exceeds the creditor claims plus costs and that additional awards under s 300 and s 301 create a further margin over those liabilities is not unusual in this context. In each of Bay Kiwifruit Contractors Limited (in liq) v Ladher; Madsen-Ries v Petera; and Richard Geewiz

Gee Consultants Limited (in liq) v Gee;¹⁸cumulative awards in relation to one or

more of current accounts, salaries paid in breach of s 161(5) and s 300 and/or S 301 claims exceeded total outstanding creditor claims. As identified in Morgenstern v Jeffreys, the excess will return to Mr and Mrs Tapusoa as shareholders in any event. In that respect I again record the position of a liquidator is to avoid unnecessary circularity. Those practical issues should not, in my view, detract from the principle

[62] In relation to the Court’s approach under s 301, the liquidators cite the tri- factor approach set out by the Court of Appeal in Mason v Lewis:¹⁹

[109] The standard approach has been to begin by looking to the deterioration in the company’s financial position between the date inadequate corporate governance became evident (really the “breach” date) and the date of liquidation.

[110] Once that figure has been ascertained, New Zealand Courts have seen three factors – causation, culpability and the duration of the trading – as being distinctly relelevant to the exercise of the Court’s discretion ...

[118] Finally, claims of this character necessarily have to be approached in a relatively broad-brush way. The jurisdiction to order recompense is of an “equitable” character.

[63] In a number of cases, including Mako Holdings Limited (in liq) v Crimp²⁰and Lakeside Venture 2010 Limited (In Liq) v Levin²¹the Court has made awards under s 301 equating to 100 per cent of creditor losses. In Mako Holdings Limited the award also included liquidators’ costs (including the costs of litigation on an

effectively solicitor and own client basis with the admonition that unless Judges take a firm line with those who choose to act in breach of their director’s duties “we will wind up creating incentives for directors to strip their companies on the basis that they can argue about it later”.²²In Lakeside Venture 2010 Limited the Court awarded costs on a 2C basis.

[64] In the present case the liquidators confine their claims to the outstanding creditor claims, no doubt on the basis that recovery of liquidators’ costs (including legal costs) can be achieved through the mechanism of the first cause of action.

_{(cumulatively) the fourth, fifth and sixth causes of action.
It emphasises the}

²⁰_{Mako Holdings Limited (in liq) v Crimp HC
Invercargill CP23/99, 28 November 2000.}

deterrence aspect of awards under s 301 for the purposes of other cases where the same current account considerations do not apply.

31 January 2011 when the company became unable to pay its due debts. All outstanding debts in the liquidation were incurred following this period. The financial position of the company was such that the defendants ought to have undertaken an objective and sober assessment of the position at that stage. That was not done with the result that it continued to trade with the inevitable consequences set out in this judgment. The loss suffered as a result of the breach is represented by the total amount of creditor claims admitted in the liquidation.

(b) In respect of causation Mr Levin’s evidence is that the losses suffered by the company and creditors were not caused by risks normally associated with trading in a competitive environment. Rather it was the defendants’ decisions to remove cash from the company for their personal benefit when the company should have first accounted for its GST, PAYE and income tax liabilities which caused the company’s inability to pay its debts. I am satisfied therefore that there is a causal link between the defendants’ breaches of their duties and the losses suffered by the company.

(c) I accept the plaintiffs’ submission that the defendants’ actions were at the upper end of the range of culpability. They failed to keep any adequate financial records. They effectively treated the company’s account as a private account for the purposes of any and all household expenditure and did so without any reference to the company’s mounting external creditors. This is not a case where the company’s failure can in any sense be attributed to the commercial risks of

trading or even to poor business decisions. It was the direct result of a decision on the part of the defendants to deprive the company of money which would otherwise have been available to meet the company’s liabilities. Culpability is compounded by the fact that the monies appropriated for private purposes included monies held by the company on trust for GST and PAYE payments. It was never in equity the company’s money to apply to the defendants’ expenses.

(d) As to duration, in Löwer v Traveller²⁴the Court of Appeal found a period of two years and 10 months of trading while insolvent was “lengthy”. In that case the company traded for approximately six years prior to being placed into liquidation.

In the present case the company traded for approximately four years and was insolvent for at least three quarters of its trading life. In that short period it caused significant losses to creditors.

In the circumstances I regard the duration of the wrongful conduct as lengthy, which is a further exacerbating factor.

[67] In all these circumstances I accept that an award under s 301 commensurate with the full extent of creditor losses is appropriate. That sum is $60,298.69 to which interest is appropriately added from the date of liquidation.

$351,096 jointly and severally against each defendant plus interest from the date of demand (28 July 2014) to the date of judgment in accordance with s 87 of the Judicature Act 1908.

(b) On the fourth, fifth and sixth causes of action (combined) in favour of the first plaintiff jointly and severally against each defendant in the sum of $60,298.69 plus interest from the date of liquidation to the date of judgment in accordance with s 87 of the Judicature Act 1908.

(c) On the seventh cause of action in favour of the second plaintiffs jointly and severally against each defendant in the sum of $9,951.90.

High Court of New Zealand Decisions

Mizeen Painters Limited (in liquidation) v Tapusoa [2015] NZHC 826 (28 April 2015)