Ex director to pay over $450,000
A former director of a South Canterbury earthmoving business has been ordered to pay more than $450,000 to the company and its liquidators.
A High Court judge has ordered Daniel O’Neill, the former director of O’Neill Earthmoving, to pay $447,055 – plus interest – toward the creditor’s claims against the liquidated company.
O’Neill has also been ordered to pay another $9487.50; the amount made by company debtor Seaforth Farms and deposited to O’Neill’s personal bank account.
In his judgement, Justice Warwick Gendall stated O’Neill Earthmoving, which was set up in April 2003, had been insolvent for more than four years before it was liquidated in August 2016.
Debts to creditors included $343,428 owed to the Commissioner of the Inland Revenue (CIR). That amount consisted of $224,989 of unpaid GST, PAYE and child support, and a separate claim of $118,439.
The judge said O’Neill also owed his other outstanding creditors $100,021.
O’Neill had been a 50 per cent shareholder in the company, and was its sole director from September 30, 2010, up to the date the company was placed into liquidation, he said.
While director, ‘‘O’Neill caused the company to incur significant significant liabilities that it had no ability repay’’, the judge said.
‘‘No evidence was found by the liquidators to suggest O’Neill had prepared a business plan, budgets, cash flow projections, or had taken any other steps to assess the company’s financial future at the operative times.
‘‘The company, having been incorporated in 2003, continued to trade whilst insolvent from, at the latest, 1 April 2011 for a period in excessive of four years. This is clearly a lengthy period.
‘‘During this time the company caused significant losses to creditors . . . I conclude that a reasonable argument exists here that Mr O’Neill directly caused this further debt to be incurred by his actions.’’
Justice Gendall said that ‘‘if Mr O’Neill had ceased trading shortly after the company became insolvent its outstanding debts to creditors, including the CIR, would have been significantly less’’.
He said he was satisfied O’Neill instructed Seaforth Farms Limited, which was not a party to the court proceedings, to pay $9487 owed to the company into his personal account.
‘‘His actions in diverting the $9487 Seaforth payment to his personal account and in extracting personal drawings of $135,132 at a time when the company’s outside indebtedness was substantially increasing . . . can scarcely be seen as muddlement but rather must border on dishonesty.’’
Justice Gendall said O’Neill could instead have used both amounts to to contribute towards paying the company’s debts.
‘‘If Mr O’Neill had undertaken a sober assessment of the company’s prospects at any time after April 1, 2011, there can be no doubt that the company would have ceased trading much earlier than it did, and it would not have had the level of unpaid debts built up.’’
Justice Gendall said the debt to the CIR included $52,000 of outstanding GST from asset sales made just before the company was placed into liquidation but after the application to the court had been filed
He said that instead of paying the GST on those asset sales to the CIR he used the money to ‘‘reduce the debt’’ to the company’s secured creditor, Heartland Bank, and paid a ‘‘small amount’’ to other creditors.
The High Court judgement followed an Employment Relations Authority decision which last year referred to financial concerns at the business.
In July, the authority ordered O’Neill to pay more than $27,000 in compensation to couple Amanda and Aaron McNoe, who authority member Helen Doyle said had been unjustifiably dismissed from the company.
Doyle said McNoe was ‘‘never given any reason for her termination but understood that it may have been because of financial concerns’’.