Receivers of a company associated with bankrupt Dave "Hendo" Henderson have been upbraided by the High Court for their behaviour.
The successful ruling potentially paves the way for damages against PwC and DB.
In 2009, DB appointed PwC accountants Maurice Noone and Malcolm Hollis as receivers of several bars in Mr Henderson’s SOL Square entertainment precinct in Christchurch’s Lichfield St.
But they were owned by different companies with directors in common for some of them.
Ian Hyndman was a director and 49% shareholder in Fish and Chip Shop with two co-directors, Dave Henderson and a Brenton Hunt. Mr Henderson, through an associated entity, owned the balance of the shares.
Messrs Henderson and Hunt were also directors and owners of two other companies, Yellow Cross Brewing Company and Edward J Swartz Entertainment Inc, which had total debts of more than $6 million.
Mr Hyndman had no interest in them.
In total, the three companies owned six bars close together and each had marketing loans from DB. Fish and Chip Shop owed $310,000. Mr Hyndman personally guaranteed this borrowing, but he was not a party to the agreements entered into by the other companies.
However, the receivers treated all of the bars as a single pool of funds.
Receipts from the three companies on a collective basis were $4,257,672. Liabilities were pooled. Total payments made by the receivers against the liabilities of the companies totalled $4,257,673. This included a payment to DB of $585,812.
No attempt was made to treat the individual companies separately, or to itemise on a company by company basis, either the monies received or the monies paid out.
The receivers sold the bars in 2010 to local hotelier Max Bremner.
DB continued to pursue the directors of the companies, including Mr Hyndman, although it based its petition against him only on the Fish and Chip Shop debt.
Mr Hyndman’s lawyer argued that it was impossible to trace the proceeds of sales attributable to Fish and Chip Shop “and that where a debt cannot be identified, it cannot be owed”.
High Court Justice Ed Wylie ruled the receivers had breached the Receiverships Act.
“I do not consider that the security documentation in place between the parties either expressly or impliedly gave the receivers the right to pool the assets ... for the purposes of sale.
“It is noteworthy that the Receiverships Act does not make express provision for pooling. This can be contrasted with the regime for liquidations and administrations.
"Section 217 of the Companies Act 1993, applying to liquidations, provides that application can be made to the court to pool the assets of related companies in limited circumstances.
“If the receivers had any doubt as to how they could best fulfil their duties, they should have applied to the court for directions under s 34 of the Act.”
Justice Wylie ordered the parties to consider their respective positions before a substantive hearing into the matter.
*Although Maurice Noone was named in the judgment, PwC tells NBR ONLINE that the the second receiver was actually John Fisk.
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- No chief of staff leaves one year before an election, says Matthew Hooton
- 'Grumpy as hell' Bill Bennett says he'll use a VPN to connect to Chelsea's club channel
- NZForex's Alex Hill says the market will be paying more attention to data, than comments from officials
- Timely chief executive Ryan Baker on making an unfashionable profit
- NZ King Salmon CEO Grant Rosewarne on his company's float plans