High Court win for Hendo and Co

Dave 'Hendo' Henderson

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.

c.hutch@clear.net.nz

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6 Comments & Questions

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All well and good to say treat separably but they where run as one and the same. About the only thing that was unique to each was the lease of each company to the landlord; and that landlord was another Henderson company. At an operational level businesses shared many things and I don't see how they where truly independent of each other.
Common directors.
Common marketing.
Common plaza.
Common development team.
Common landlord.
Common mismanagement.

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Common response from another Hendo basher . I say good on them .PWC have had some press lately doing the wrong thing . The reality is there is a process that has to be followed and I guess they didnt.

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Couldn,t agree more.

High time the two pwc partners named here are checked or even delt with in some way.

Another smack delivered from the high court. You would think the fma would have a look.

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How many other cases are out there where PWC have not followed the law? Hope someone has a look

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John Fisk or Maurice Noone.

Take your pick.

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I had a business in ChCh and a contract with DB , Business struggled and got promised help by them and the next minute the receivers were knocking on my door . Db are b-----d and hope they get their own treatment on this one .

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