15 May 2023

Company: Walters v. Neale

 

Tani and Margaret Neale were told to cough up $177,000 proceeds from sale of Wanaka-based TMC Transport’s trucks with the High Court saying the company would be put into liquidation if they did not sort out their differences with fellow shareholder Luke Walters.

The court was told two trucks and a flat deck trailer previously owned by a company controlled by Mr Walters were sold in 2018 to a new company called TMC Transport 2018 Ltd.  TMC was owned 50 per cent by Mr Walters and 50 per cent by Tani and Margaret Neale.  Their business relationship fell apart in a little over a year.  The Neales fired Mr Walters as one of the two directors.  He left the company.  The High Court subsequently ruled this supposed dismissal of Mr Walters was invalid; correct company procedures for removal of a director had not been followed.

The trucks and trailer were sold after Mr Walters departed.  The Neales kept the $207,000 net sale proceeds; saying initially this was in repayment of money they had lent the company, later saying they were holding the money in ‘safe-keeping’.  There was no evidence that the money was being held on deposit, in trust.

Mr Walters sued, complaining the Neales had taken for themselves all proceeds from sale of company’s assets leaving him with nothing.  Some $30,000 of this money was used by the Walters to pay TMC Transport’s GST obligations.

Associate judge Lester ruled the Neales’ unilateral removal of Mr Walters as director amounted to prejudicial behaviour in breach of the Companies Act.   If the two sides cannot agree on how the sale proceeds should be divided, a liquidator will be appointed, he said.

The Neales were given seven weeks to sort out their differences with Mr Walters.  Failing that, a court appointed liquidator takes control.  If automatic liquidation kicks in, the Neales must repay $177,000 to the company within ten days.

Walters v. Neale – High Court (15.05.23)

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