Duncan
Napier, former manager of a Torbay rest home in Auckland, was ordered to repay
$1.4 million improperly taken from the business. His wife Sara was held jointly liable for
$720,000. The missappropriated funds
were used primarily to develop a Wellsford lifestyle block.
The High Court was told Mr Napier was in
charge of the rest home for eleven years, ending in 2012. The business, catering for 52 residents, was
purchased by a group of investors in 2001 with Mr Napier’s family trust taking
a twenty per cent stake. Mr Napier was appointed
administration manager; Mrs Napier nurse manager. Initially only Mrs Napier had cheque signing
authority while her husband completed a scheme of arrangement with creditors
unpaid after his previous business as a toy retailer in Henderson was wound
down. These creditors were paid seven
cents in the dollar.
Later Mr Napier was to assume cheque
signing authority and it was his use of the rest home cheque book which was to
feature heavily in nearly three weeks of evidence in the High Court.
Mr Napier told the court that the large
number of cash cheques, totalling 522 over a seven year period, was
reimbursement of expenses incurred on behalf of the rest home. He also said the irregular salary payments received
included periodic employee benefits supposedly agreed with his fellow rest home
investors.
Justice Woolford ruled that Mr Napier
overpaid himself and his wife $281,000 over seven years, being the sum of their
income declared to Inland Revenue less their agreed salaries of $41,500 for Mr
Napier and $52,000 (rising to $60,000) for Mrs Napier.
Mr Napier’s diversion of rest home money
into development of his Wellsford property only came to light in April 2012
when Inland Revenue made a demand on the rest home for some $196,000 in unpaid
PAYE, GST and Kiwisaver contributions plus penalties and interest of another
$79,000. Forensic accountants installed
by the rest home investors found $509,300 in cash cheques had been signed with
no supporting receipts, many other cheques were made out to building suppliers
in the Wellsford area and further payments were wrongly coded as payments to
rest home suppliers who did not in fact receive payment.
Justice Woolford said the Napiers would
have been quite unable to meet principal and interest payments due on their own
personal debts by relying on their rest home salaries alone. It was impossible to accurately assess the
amount missappropriated because of the lack of proper records kept by Mr
Napier. In determining the amount
missappropriated, only thirty per cent of the suspect payments can be justified
at best as reimbursement of rest home expenses, Justice Woolford said. He ordered the Wellsford property be held in
trust, available to repay the money taken.
There was evidence the house on a 20 hectare lifestyle block has a
replacement value of $1.425 million.
Separately, the Napier Family Trust was
held liable for $95,730 of the total missappropriated. This liability falls on the trustees
personally: Mr and Mrs Napier and an independent solicitor, Christopher John
Davis. The Napiers washed some of their overpaid
remuneration through the family trust.
Torbay
Holdings v. Napier – High Court (9.10.15)
15.113