Former owners of Red Fox Tavern at Maramarua were ordered to pay $936,000 for trading whilst insolvent and also using company cash for personal expenses. In addition, Kelly William Ross and Kelly Michelle Mounsey-Ross siphoned off $216,000 proceeds from selling the business by channelling their sale through a company controlled by Mr Ross’ mother.
Operating through their 50/50 company Kelstworural Ltd, the two took over Red Fox Tavern in 2011, closing down and selling the business six years later. The High Court was told the business was under-capitalised from the start and was trading whilst insolvent almost from the get-go. They paid trade creditors to ensure the Tavern was supplied on order, but defaulted on PAYE and GST payments due Inland Revenue. By the time Kelstworural was forced into liquidation by Inland Revenue, tax arrears pus interest and penalties totalled some $610,000. Inland Revenue was the only creditor in Kelstworural’s liquidation.
Liquidators PriceWaterhouseCoopers sued them for breach of directors’ duties. Justice Jagose ordered the two pay $609,700 to the company for trading whilst insolvent. There was no evidence they made any effort to ensure Inland Revenue was paid on time, he ruled. Unpaid PAYE and GST was used as working capital. At a time when Inland Revenue was unpaid, the two benefitted from $326,000 company cash used to pay personal expenses. The liquidators also sued them to recover these personal drawings.
Kelstworural Ltd v. Mounsey-Ross & Ross – High Court (2.07.21)
21.112