Stalling on payment of an overdue debt, Nelson entrepreneur Warwick Jones contributed to a creditor’s confusion, causing it to wind up the wrong company for non-payment. He was ordered to pay three-quarters of legal costs incurred untangling the problem.
The High Court was told Mr Jones stood discreetly in the courtroom public gallery while his company Sensys Ltd was ordered into liquidation, ostensibly over a debt owed to supplier Australian-owned GPC Electronics (NZ) Ltd. Sensys Ltd was a shell company, with no assets and no trading history. Mr Jones formed Sensys Ltd to protect the Sensys name. His trading company was called Design Electronics Ltd. It was Design Electronics which owed GPC Electronics.
Confusion arose after Design Electronics opened a trading account with GPC giving as its name: Design Electronics Ltd trading as Sensys. The customer name recorded in GPC’s accounting system was Sensys.
Evidence was given of GPC first chasing an overdue account in May 2018. The letter was addressed to Sensys Ltd. Three weeks later, the debt was paid. Four months later, GPC was chasing another late payment. Again, the letter was addressed to Sensys Ltd. Mr Jones emailed his reply over the word ‘Sensys.’ With legal action threatened, Mr Jones did nothing other than plead for time with emails written on behalf of the 'Sensys Team.’ The day after Sensys Ltd was put into liquidation he told the liquidator GPC had the wrong company.
Associate judge Lester ruled Mr Jones’ actions were a major contributing factor. Lawyers acting for GPC made the initial mistake; Mr Jones actively compounded the error by representing in his correspondence that Sensys was the debtor. These actions strongly suggest Mr Jones was aware the wrong company was being pursued and chose to remain silent to buy time, Judge Lester said. Mr Jones was ordered to pay three-quarters of the wasted costs incurred putting Sensys Ltd into liquidation and then reinstating the company to the Companies Register. The amount due is not yet finalised.
GPC Electronics (New Zealand) Ltd v. Jones – High Court (15.08.19)
19.147