Kaiapoi businessman Dale Wadsworth took up cousin Troy Surch’s suggestion he set up a stand-alone company to hold surplus cash, having to sue nearly a decade later to regain control of his company and its assets. Mr Surch had wrongly seized control of their company Cognata Investments and was using it for his own benefit as a moneylending business, he claimed.
The High Court was told Mr Wadsworth was seriously injured in a near fatal motor vehicle accident in late 2014. His business, CTC Radiators Ltd, was then flush with cash.
Mr Surch was at the time providing accounting services for CTC Radiators. He recommended a separate company be established to manage CTC’s spare cash given Mr Wadsworth’s ongoing health issues following his accident.
Cognata Investments Ltd was set up. Both were directors. For reasons never fully explained, a family trust called Zurich Oak Trust was named as shareholder. Mr Wadsworth was a Zurich Oak trustee. He was not a beneficiary; Mr Surch’s family members were the beneficiaries.
One year later, Mr Surch unilaterally removed Mr Wadsworth as a Cognata director and had the company’s shares transferred into his name alone. Mr Surch then proceeded to make multiple loans: to members of his family and to his family trust; to purchase a car for his own benefit; and to buy a business in which it was alleged Mr Surch was a silent partner. He also arranged $42,000 in loans for the purchase of two racing cars and a $50,500 loan to Stewart Island Smoked Salmon Ltd, a loan since written off.
By 2018, Mr Wadsworth health had improved. Mr Surch was unco-operative when Mr Wadsworth attempted to become more involved in Cognata’s business activities. Mr Surch had ANZ Bank remove Mr Wadsworth as signatory to Cognata’s bank account. When Mr Wadsworth protested, ANZ froze the account pending resolution of their dispute. Evidence was given that some $850,000 is currently sitting in this account.
Mr Surch complained to the Companies Office when Mr Wadsworth unilaterally removed him from the record as Cognata director and shareholder.
Mr Wadsworth sued in the High Court to get a definitive ruling on his rights of ownership. The hearing went ahead in the absence of now bankrupt Mr Surch.
Justice Dunningham ruled Mr Wadsworth sole director and sole shareholder of Cognata Investments. Cognata’s constitution specifically stated net income and capital gains were held on behalf of Mr Wadsworth on the basis that all capital provided for investment came from him.
Wadsworth v. Cognata Investments Ltd – High Court (2.11.23)
24.005