Receivers Peri Finnigan and Boris van Delden are potentially liable for damages in excess of $150,000 after Dayle Walker forced business colleague Joanne Young out of their Auckland early childhood business Learning Ladder in a March 2018 pre-packaged receivership.
The High Court was told management differences between Walker and Young saw Dayle Walker use a secured loan over their Howick business assets to call in receivers who took control of the business. One day later, receivers sold the childcare centre assets to a new company controlled by Dayle Walker, cutting out Joanne Young who alleged assets were sold on the cheap at her cost.
Nearly one week of conflicting valuation evidence in the High Court saw divergent views on Learning Ladder’s value.
Chartered accountant Eric Lucas took the orthodox view; current value is assessed by analysing historical financial data. He valued Learning Ladder at between $450,000 and $500,000. Receivers sold Learning Ladder assets to Ms Walker’s new company at $470,000. Most of that money went to Ms Walker and her husband in repayment of their $430,000 on demand loan to Learning Ladder.
Michael Nimot valued Learning Ladder at $760,000. Operational efficiencies could improve business profitability, he said. The possibility of future cost savings should be taken into account when assessing current value.
Justice Walker took future cost savings into account. Wage costs are the biggest single line item for early childhood centres. The High Court was told staff costs at Learning Ladder were high by industry standards, even taking into account staffing levels required by childhood centre regulations. Potential savings saw Learning Ladder have a market value of around $700,000 as at March 2018, she ruled.
Receivers are liable to pay compensation if they sell assets at an undervalue.
Rather than selling at $470,000, the best price receivers should have obtained was between $625,000 and $643,000 Justice Walker ruled. For a trading business like a childcare centre there is no obligation to get full market price, she said. There are too many uncertainties should receivers be left in control for an eleven to twelve week marketing programme; key staff may leave and customers take business elsewhere while receivership costs continue to rise.
Reynolds v. Finnigan – High Court (1.02.23)
23.017