Any failure to properly document drawings from a closely-held company can result in court orders for repayment. Liquidators of an Auckland company chased after drawings from one company totalling more than one million dollars.
APG Holdings Ltd was wound up in 2007. Liquidators, Messrs Blanchett & Burns, found a total of $1,081,000 had been paid to a Rita Wilson in the three years prior to liquidation. She had no identifiable role within the company. Enquiries showed she was the daughter of a former director and the wife of Terry Wilson who was a director at the time the company went into liquidation.
Rita Wilson did not respond to the liquidators’ specific enquiries about the payments. They sued.
She first argued that the various payments were received into her bank account without her knowledge and that they were in the main instalments of a company salary due to her husband.
This argument was dismissed in the High Court. There was no employment contract between Mr Wilson and the company, no PAYE was deducted from the payments and the company’s accounting records made no mention of the payments as salary.
In the Court of Appeal, Rita Wilson argued that the payments were loans made by the company to her husband. This argument was also dismissed. There was no documentary evidence of the terms of any loan or of any obligation to repay.
The payments received of $1,081,000 were in the nature of gifts to Mr and Mrs Wilson and had to be repaid by Mrs Wilson. The court was told that Mr Wilson was bankrupt.
The Wilsons said Terry Wilson had lent some $750,000 to APG when the company was operating and this amount should be set-off against the one million required to be repaid. A further court hearing is required to establish the validity of this claimed set-off. Meanwhile, the court ordered that $249,000 be handed over to the liquidators immediately.
Wilson v. Blanchett & Burns – High Court (15.07.11), Court of Appeal (15.12.11) & Supreme Court (24.02.12)
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