Financiers
of the Matakana and Goldridge wine companies were held partly responsible for
their own losses of over $2.62 million after the companies went under when the
High Court held them fifty per cent to blame in legal action against chartered
accountant Mark Withers who had accepted responsibility for overseeing
disbursement of loan monies.
The High Court was told US investors provided
working capital to the Vegar family’s wine business for some eight years before
the businesses closed down in late 2010.
Paul Vegar filed for bankruptcy while Peter and Jean Vegar put a debt
compromise to creditors.
Working capital for Matakana’s and Goldridge’s
wine business and property developments was funelled through GTF Capital Ltd,
an investment bank. Loans were on a “non-recourse”
basis with repayment due after each year’s vintage had matured and been
sold. It was important to GTF that funds
advanced each year were applied only to the processing and bottling of that
year’s harvest as it had recourse only to that year’s production for repayment of the year’s
advances.
Evidence was given that in March 2008 and again
in 2009 Mr Withers signed a letter to GTF stating that he was joint signatory
of the relevant funding account and he undertook that the account would be used
solely to meet costs of processing the 2008 and later the 2009 harvests. Mr Withers and his firm Withers Tsang and Co
Ltd were primarily responsible for tax work on behalf of the Vegar family. He was not a signatory to the funding account,
members of the Vegar family were. The
court was told funds were rapidly shifted out of the funding accounts and used
elsewhere.
Justice Peters ruled the signed letters amounted
to an express statement by Mr Withers that he would oversee how the funds would
be applied. His failure to in fact
oversee the disbursement of this working capital was a breach of the Fair
Trading Act. The financiers had been
misled or deceived. Money had been
released from the funding accounts which would otherwise be available for
repayment to them.
The financiers lost $2.62 million plus accrued
interest, but Justice Peters ruled that Mr Withers was liable for only half
this loss. Financial statements provided
to the financiers should have put them on enquiry. They described loan advances being made to
related parties, loans which should never exist if the funding was being used
as prescribed to pay processing costs.
Also, the financiers did not act quickly when becoming aware the wine
company was in financial difficulty.
Nine months prior to default, GTF was told by either Peter or Paul Vegar
that liquidity was tight, Justice Peters said.
Then it was another 14 months after a payment due was missed before the
financiers appointed a receiver. They
must bear some of the consequences of this delay, Her Honour said. There was evidence that Matakana and
Goldwater had traded at losses in excess of five million dollars over the period
2001-2008.
Mr Withers was ordered to pay damages of $1.31
million plus interest on this half share.
He held professional indemnity insurance with Zurich Australian Insurance. Justice Peters ruled Zurich was liable for
this amount.
Swindle
v. Withers – High Court (30.4.15)
15.040