ordan and Vance vs O’Sullivan and ORS
Commercial Law 204 Essay
Jordan and Vance vs O’Sullivan and ORS
Condrens Parking Limited was a company engaged in the supply of parking services in Wellington, Auckland and Hamilton. Condrens managed its business by leasing carpark buildings or vacant lots available for parking opportunities.
The plaintiffs in this case were the liquidators of Condrens Parking Limited and the defendants were Messrs O’Sullivan, Mckinley and Condren together were the shareholders of Condrens. The plaintiffs legal proposition that they relied on in this case where the directors of Condren in their capacity breached duties they owed to Condrens to have regard for the interests of Conderns creditors.
The breach was alleged in two aspects:
Advances made to a related company of CPL in which the directors of Condrens were directly involved that were in fact irrecoverable from that related company.
Allowing CPL to assume liability under several long term leases of car parking buildings, without professional assessment or providing the risks associated with CPL entering into such leases
This essay will focus on the general principles the judge adopted in this case and we will look at how principles of case law and essential pillars of s 135 relate to reckless trading. We will also look at a few arguments for and against a more balanced and restricted interpretation of the section.
S 135 Reckless trading – A director of a company must not
a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.
b) Cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.
Justice Clifford stated the basic legal principle articulated by the plaintiffs, that is, where a company is, or near to being insolvent, the duties the directors owe to the company require them to consider the
Jordan and Vance vs O’Sullivan and ORS
Condrens Parking Limited was a company engaged in the supply of parking services in Wellington, Auckland and Hamilton. Condrens managed its business by leasing carpark buildings or vacant lots available for parking opportunities.
The plaintiffs in this case were the liquidators of Condrens Parking Limited and the defendants were Messrs O’Sullivan, Mckinley and Condren together were the shareholders of Condrens. The plaintiffs legal proposition that they relied on in this case where the directors of Condren in their capacity breached duties they owed to Condrens to have regard for the interests of Conderns creditors.
The breach was alleged in two aspects:
Advances made to a related company of CPL in which the directors of Condrens were directly involved that were in fact irrecoverable from that related company.
Allowing CPL to assume liability under several long term leases of car parking buildings, without professional assessment or providing the risks associated with CPL entering into such leases
This essay will focus on the general principles the judge adopted in this case and we will look at how principles of case law and essential pillars of s 135 relate to reckless trading. We will also look at a few arguments for and against a more balanced and restricted interpretation of the section.
S 135 Reckless trading – A director of a company must not
a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.
b) Cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.
Justice Clifford stated the basic legal principle articulated by the plaintiffs, that is, where a company is, or near to being insolvent, the duties the directors owe to the company require them to consider the
References: http://www.kensingtonswan.com/Legal-Updates-And-Events/Corporate-and-Commercial/2008/Risky-business%E2%80%94what-are-directors%E2%80%99-obligations-und.aspx http://books.google.co.nz/books?id=OqqWat96H-QC&pg=PA266&lpg=PA266&dq=what+approach+did+the+Judge+in+this+case+take+when+interpreting+s+135+nz&source=bl&ots=eO43d-fcV4&sig=qm-Zo4Os20Fb83gR7xi0AiZmsn8&hl=en#v=onepage&q=what%20approach%20did%20the%20Judge%20in%20this%20case%20take%20when%20interpreting%20s%20135%20nz&f=false http://www.bellgully.com/newsletters/12corporate/company_2.asp http://www.fortunemanning.co.nz/Publications/Commercial/DIRECTORS+LIABILITY+FOR+RECKLESS+TRADING.html http://www.propbd.co.nz/afa.asp?idWebPage=8338&idBobDeyProperty_Articles=10506&SID=910320041 http://library.victoria.ac.nz.helicon.vuw.ac.nz/ereserves/2012/com/t2_coml204_watts_insolvency.pdf