Long-standing family bakery and café Il Forno in Auckland’s trendy Ponsonby has seen legal fisticuffs behind the scenes; Andrew Kleine fended off older brother Jim’s claims to a half share in the business. In turn, Jim was ordered to pay $14,100 damages; tax fines racked up following Jim’s failure to properly action Il Forno’s tax filings.
The High Court was told Andrew Kleine gained full control of Il Forno in 2006, after buying the other half interest then held by fellow restauranteur Antonio Crisci; a buy-out funded with cash from both Andrew and other family members. Andrew ran the bakery; brother Jim provided ill-defined administrative support. Nearly a decade on, tensions between the two were ratcheting up. Evidence was given that the final trigger was a difference of opinion over food deliveries: Andrew preferred an in-house driver; Jim, use of couriers.
In court, Jim claimed he owned fifty per cent of Il Forno; the result of him contributing $10,000 towards the $135,000 paid Mr Crisci on the 2006 buy-out. Justice Jagose ruled the $10,000 was not an equity contribution; it was a loan. In all his dealings with suppliers, Inland Revenue and lawyers Jim had not once claimed to be a part owner. He had always represented brother Andrew as ‘proprietor’ and as ‘sole shareholder and director.’
Jim’s claim to $650,000 compensation for unpaid services provided to Il Forno was dismissed. Jim provided no evidence of what his actual duties were, Justice Jagose ruled.
Il Forno in turn sued Jim for negligence. There was evidence of Jim being paid a retainer to look after Il Forno’s accounting functions and tax filings. The High Court was told inadequate accounting records were kept. In addition, Jim failed to file Inland Revenue returns on behalf of Il Forno for income tax, PAYE and GST on a range of dates from 2007. Il Forno was convicted and fined some $14,100. Jim was ordered to compensate Il Forno for this negligence.
Il Forno Ltd v. Kleine – High Court (31.07.20)
20.132