It was only after Toni-Anne Lee parted company with brother Scott that some $66,500 she received from their company TS Training Ltd was disputed as being either payment she could keep for work done or shareholder advances requiring repayment.
The two established Hamilton-based TS Training Ltd in 2020 to provide education and training courses, primarily for Ministry of Social Development. They were not employees; they contracted their services to TS Training.
Each billed TS Training a little over one thousand dollars each week for consultancy fees. Further invoices for consultancy fees, most lacking any itemisation, were submitted after provider contracts were negotiated with Social Development: a $100,000 contract in November 2020 and a $340,000 contract in April 2021.
The High Court was told their accounting adviser recommended these payments be recorded as shareholder advances; lump sum payments should not be recorded as payment for work done when in fact the work was yet to be done. This advice was ignored.
Toni-Anne left TS Training Ltd in 2021, transferring her shareholding to brother Scott at no cost. Scott, now in sole control of the company, subsequently claimed she had received some $66,500 in shareholder advances now due for repayment.
Financial statements for TS Training drawn up after Toni-Lee left the company recorded, for the first time, the existence of shareholder advances.
Justice Powell ruled there was no contemporary evidence at the time payment was made that that the disputed contract payments were to be treated as shareholder advances.
In addition, Scott argued that repayment was required because his sister had done no work for the company beyond that covered by weekly payments. She was working for two other companies at the time.
Again, there was insufficient evidence, Justice Powell ruled. Their practice of submitting pro forma consultancy invoices unsupported by any narrative or timesheet records to justify withdrawal of funds from their company meant there was no evidence of what work was, or was not, done.
Ms Lee was held entitled to retain the disputed $66,500.
TS Training Ltd v. Lee – High Court (3.07.24)
24.171