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Alan Sorrell shared victory in both the High Court and Court of Appeal where the Court punished breach of obligations by Trustees and Directors.  See Hilary Jane Calvert and HGW Trustees Limited and Chris James v Grant Bruce Reynolds [2016] NZCA 151; 22 April 2016.

James Developments Limited (JDL) had judgement entered against it by a creditor for $4 million.  JDL’s sole Director was Chris James and all the shares were owned by a Trust he had settled.  The Trustees were companies associated with Chris James’ accountant’s Harvie Green Wyatt and with lawyers including Hillary Calvert.   JDL decided to liquidate rather than meet the judgement.  A loan by JDL to the Trust of $740,000 was removed by a resolution attempting to change how it was analysed.  When JDL’s choice of Liquidator was replaced, inquiries as to the assets in the Liquidation began.  A post resolution balance sheet omitting the loan was provided to the new Liquidator.   A “drawn out process” of requesting information was met with a deliberate failure to provide full answers which would have demonstrated that the terms of the resolution were false.  Eventually the Liquidator established a proper basis for a claim and sued.

After a week of hearing evidence the Judge was satisfied neither the sole Director Chris James, nor the Trustees genuinely believed there was a proper basis for recoding the transaction and for the consequent amendments to the accounts. The Court described the resolution as “a deliberate, if unsophisticated, device to remove the asset from JDL’s balance sheet to avoid relinquishing it to JDL’s main creditor.”

The defendants had eventually acknowledged the debt but claimed the protection of the Limitation Act because of the time that had passed.  The Court found fraudulent concealment meant that defence failed.

Judgement was entered against the current Trustees for $740,000 plus increased legal costs of $137,000.  Interest was awarded from 27 June 2012 being when the Liquidator was first reasonably able to discover the truth. The High Court while finding Chris James breached his fiduciary duties to JDL refused to enter judgement against him.

The defendants appealed to the Court of Appeal so the plaintiffs cross appealed seeking judgement against Chris James and more interest.  The outcomes provide some warnings of the risk of an appeal.  The appeal failed and the cross appeals succeeded. The Court of Appeal was robust in its criticism of the Trustees and the Director.  They also criticised both the accountants involved including one who had been lightly treated in the High Court judgement. Judgement was also entered against Chris James.   Interest was awarded from 6 July 2009, when the concealment began, amounting to another $160,000.

Will the Appellants seek leave to appeal to the Supreme Court?