Bankruptcy: Chesterfield Preschools v. Sisson

Liquidators of Christchurch company Chesterfield Preschools will be relieved director Therese Anne Sisson has been declared bankrupt.  They have faced a frustrating saga dealing with her in attempts to wind up the company’s affairs.

Early childcare business Chesterfields Preschools Ltd ceased trading in 2004 following a tax dispute according to liquidator PwC’s first report. Eleven years later, Inland Revenue put the company into liquidation.  Company Office records show Ms Sisson became a director ten months before liquidation.  She alleges maladministration by Inland Revenue caused the company’s failure.  In a series of court applications, Chesterfield challenged both the debt claimed by Inland Revenue and the liquidation order itself.  A Court of Appeal hearing on Chesterfield’s liquidation order is imminent.

In the interim, liquidator PwC has found Ms Sisson unhelpful.  Company records have gone missing.  They were either destroyed in the Christchurch earthquakes or inadvertently thrown out by a relative during a shift, she said.

Chesterfield’s liquidators bankrupted Ms Sisson for non-payment of a $7853 court costs order unpaid following earlier litigation by her involving the company.  She challenged the bankruptcy proceeding, first by demanding that the judge hearing the application stand down from the case because she had “lost all confidence” in him, and secondly, arguing the bankruptcy application should be stayed otherwise it would prejudice the imminent Court of Appeal hearing over Chesterfield’s liquidation.

Associate judge Osborne declined her request he stand down.  The various rulings and judgments made previously, while numerous and for the most part against Ms Sisson’s position, have simply required the court to apply relevant statutes and well settled principle, he said.  There is no basis to suggest actual or apparent bias.

Bankruptcy will not impact on the pending appeal, he ruled.  Should the Court of Appeal overturn Chesterfield’s liquidation order, she still owes Chesterfield $7853 and that debt is unpaid.        

Chesterfields Preschools Ltd v. Sisson – High Court (23.06.17)

17.073

Liquidation: Finnigan v. Ellis

Peri Finnigan and Boris van Delden from insolvency specialists McDonald Vague were told the net was cast too wide in their attempt to force lawyer Brian Ellis hand over personal tax returns and a statement of his financial affairs as part of their plans to sue directors of failed Wenztrou Co-operation Ltd.

In what is a first for New Zealand, Ms Finnigan and Mr van Delden are attempting to get access to directors’ personal financial affairs to see whether they are worth suing.  Australian courts have accommodated liquidators, in particular allowing them to see details of any professional indemnity insurance held by directors of insolvent companies.

As liquidators of Wenztrou, formerly known as Trojan Foods (NZ) Ltd, Ms Finnigan and Mr van Delden are looking to sue the company’s directors for some $775,000 alleging breach of their directors’ duties.  Liquidators have statutory powers under the Companies Act to examine on oath company directors about “the affairs of the company”.  Wenztrou’s liquidators want to see Mr Ellis’ personal tax returns for the period 2012 to 2016, copies of his personal bank statements, a list of all his assets and liabilities valued at more than $10,000 and the names of all trusts in which he has an interest as either trustee or beneficiary.

Associate judge Sargisson ruled the liquidators failed to justify why such wide-ranging demands were necessary.  She left open the question of whether liquidators should even be permitted to get access to directors’ personal financial details. 

Finnigan v. Ellis - High Court (23.06.17)

17.072

Relationship Property: Schwass v. Marsh

Family support totalling $910,000 to buy farmland and set up an egg supply business at Koromiko near Picton was a loan not a gift and did not form part of relationship property.

Donna Marsh’s de facto relationship with Andrew Schwass came to an end in 2013 after some eleven years.  She claimed a $910,000 advance made three years previously from Andrew’s parents’ family trusts was a gift and was relationship property.  Legal documents evidencing a loan were drawn up, but never signed.  Justice Cull ruled the advance was an interest free loan.  Correspondence between the Schwass family and lawyers acting on the purchase stated the advance was to be a short-term loan.  There were delays while lawyers enquired whether Andrew and Donna were to be borrowers in their own name or through a family trust.  A caveat was lodged against the Koromiko title protecting the Schwass family trusts as creditors under “an agreement to mortgage”, but no such agreement was ever signed.  Oral mortgages over land are not enforeceable.  The land cannot be sold to recover money due.

The Schwass family trusts were protected by the doctrine of part performance, Justice Cull ruled.  Terms of the loan had been agreed as evidenced by the correspondence plus the unsigned documents.  The money had been handed over.  The oral Schwass mortgage was enforceable as a secured loan.     

The $910,000 advance was used to develop an egg farm, Koromiko Free Range Eggs Ltd.

Schwass v. Marsh – High Court (22.06.17)

17.071