Published 12 November 2010
Auckland High Court associate judge Roger Bell has found insolvency practitioner Gilbert Chapman is in contempt of court and has ordered him to account for more than $200,000 from the sale of a business of which he was liquidator.
Associate Judge Bell said he would preside at a public examination of Mr Chapman on Wednesday 1 December at 2.15pm.
East Tamaki Curry House Ltd owner Ramakrishna Rai went to Mr Chapman in September 2009 for advice on selling the business, a manufacturer & distributor of Indian food products and owner of its own building, and on closing the company.
Mr Chapman, of Business Dissolution & Recovery Service Ltd, recommended putting the company into liquidation before selling the assets, although there was no pressing need to do so.
The sale price had been $250,000, but the buyer said the liquidation would cut the value and the renegotiated sale price was $175,000 – a 30% reduction. Mr Chapman said he’d had to take over running the business in its final days, and his fees for the liquidation came to nearly $63,000.
After Mr Chapman went overseas on holiday during December-January, Mr Rai tried to have him removed as liquidator. Mr Chapman wouldn’t budge and wouldn’t call a shareholders’ meeting, so Mr Rai went to court.
In July, Associate Judge Bell ordered Mr Chapman to call a shareholders’ meeting by 12 August – a meeting which was called a week after the deadline. The judge also set Mr Chapman’s fee at $25,000 plus gst up to 3 May, accepting his charge-out fee of $200/hour but halving the $140/hour fee for support staff, and ordered Mr Chapman to pay back all fees above $25,000.
At the 20 August shareholders’ meeting, Paul Sargison & Gerry Rea (Gerry Rea Partners Ltd) were appointed to take over from Mr Chapman as liquidators but, when Mr Rai went back to court to have that appointment validated in September, Mr Chapman still hadn’t paid anything back and also hadn’t handed over any documents.
Associate Judge Bell made a declaratory order requiring Mr Chapman to hand over all records within 5 working days and to pay back $42,490, which the judge calculated was the excess remuneration, including gst, and to attend court in person at the next call.
With the case back in court on Wednesday, Associate Judge Bell said the evidence was that “there has been some, but very slight, compliance with these orders”, that Mr Chapman had failed to comply with notices served on him and had stalled in complying with his obligations.
“There is now concern whether he has dealt with funds that have come into his hands as liquidator properly & in accordance with his duties as liquidator. In my view, there is a very clear need for Mr Chapman to attend before court to be examined about these matters so the present liquidators can understand clearly what has happened with the funds, how they have been disposed of, and whether they are now available for creditors.”
The judge said he’d decide what fine should be imposed for contempt of court after he’d seen “what steps Mr Chapman has taken to redeem himself between now & the examination”.
The replacement liquidators sought the examination of Mr Chapman on matters relating to the business accounts & affairs of East Tamaki Curry House “and, in particular, receipts & payments from a specified ASB account and the disposition of a sum of $213,455.81 paid to him as liquidator, being the proceeds of sale of the East Tamaki Curry House Ltd business”.
Associate Judge Bell ordered Mr Chapman to provide all relevant banking & accounting documents to the new liquidators at least 5 days before his examination.
17 September 2010: Gilbert Chapman ordered to repay $42,000 liquidation remuneration
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Attribution: Court minute, story written by Bob Dey for the Bob Dey Property Report.