Leaving taxes unpaid after clearing all assets out of his cashed-up company cost Peng Chih Chen $590,200. It was a breach of director’s duties to ignore tax liabilities, leaving his company as an empty shell.
Mr Chen was sole director and shareholder of Alala International Ltd. The company initially operated a golf course at Bucklands Beach in Auckland, operating then under the name BlueSky Golf Management Ltd. After a brief foray into selling souvenirs, Alala International got into the property business. In 2016, it purchased real estate in Queenstown. This was sold just on a year later. Net proceeds of $1.8 million were banked, after repayment of a Southern Cross Finance mortgage.
The High Court was told this $1.8 million was quickly disbursed over the next four months. When questioned by Alala International liquidators, Mr Chen was unable to clearly identify all the recipients of various payments made or provide reasons why they might have received payment. Alala was put into liquidation in 2019 by Inland Revenue for unpaid tax debts. Inland Revenue claimed $503,400, including $330,000 GST arising on the Queenstown sale.
Associate judge Fitzgerald ruled Mr Chen breached Companies Act duties owed as director to Alala International: failing to act in good faith; failing to act with due care; and trading recklessly. He was ordered to pay damages totalling $580,200 to Alala International. He did not appear in court to defend the claim.
Mr Chen was also ordered to pay ten thousand dollars to Alala’s liquidators; compensation for time spent reconstructing Alala’s poor accounting records.
Alala International Ltd v. Chen – High Court (28.08.20)
20.147