Creditors gun for Tasman Pacific directors

Friday 22nd June 2001

LIABILITY CHALLENGED: With estimates of the damage done by the Qantas New Zealand collapse, ranging from $70 million to $100 million in unpaid debts, creditors are questioning how Tasman Pacific could lose more than its turnover

By Campbell McIlroy

The filing of seemingly minor Companies Office charges against directors of Tasman Pacific may open the way for creditors to take legal action in a bid to claw back some of the millions owed to them.

Seven past and present directors of Tasman Pacific face five charges each for failing to file proper financial statements.

Legal experts said if the failure to maintain the company's accounts was causative - in that creditors lost money only because they thought the company was viable and continued to supply it - liability could well flow to the directors.

If the Companies Office action is successful it could leave the directors open to other claims that they breached the Companies Act.

The court can declare directors or former directors personally responsible, without limitation of liability, for all or any part of the debts and other liabilities of the company or for failing to keep proper accounting records.

But only the liquidator can apply to the court for a liability order to be made and Tasman Pacific's liquidator was appointed by its own directors.

The parts of the Companies Act that creditors are reading carefully include those that state:

directors must not agree to business or trading that is likely to create a substantial risk of serious loss to the company or its creditors (s135);

directors must not incur obligations they do not have the ability to meet (s136); and

the board must ensure accounting records are kept which correctly record and explain transactions. The records must at any time allow the financial position of the company to be determined (s194).

Some creditors are already preparing legal action against the directors to recover money owed to them.

Pacific Flight Catering managing director Terry Hay said he would take legal action against the directors to recover the $1.3 million his company is owed.

Mr Hay said the fact the directors would not file the simple annual financial statement document may indicate the state of the company was much worse than had been thought.

"I think everybody knew they weren't making money but that's different from saying, 'I'm broke and can never repay you'," he said.

Base Care chief executive Colin Anderson said he did not believe procedures had been carried out correctly and if the directors knew they were insolvent then someone had to be held accountable.

Mr Anderson thought the money the directors would spend defending the Companies Office action would be better spent "going into the pool" to pay off creditors.

Mr Anderson said if the charges established the company was in bad shape earlier than publicly thought it would reinforce the creditors' position that directors should personally repay some of the debt.

He said he was prepared to proceed with action to recover as much of the debt as possible from the directors.

Mr Anderson said he hoped to have a website established by the end of the week <www.
liquidation.co.nz> to provide general information to creditors who wished to join an action to appoint an independent liquidator.

A letter from liquidator Arron Heath of Meltzer Mason Heath said there were more than 700 trade creditors listed and the number would increase.

Estimates of the damage done by the Qantas New Zealand collapse range from $70 million to as high as $100 million in unpaid debts.

Mr Hay said a company did not lose that much in the last week or month of trading, suggesting the company was insolvent before Christmas.

"That's why they're not filing their statements. The business didn't have a turnover that big. How can you lose more than your turnover?"

The first call over for the hearing has been set down for July 25 in the Auckland District Court.

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