By FIONA ROTHERHAM
The failed fit-out company that worked on many of Auckland's high-rise construction projects may have been trading while technically insolvent.
At a creditors meeting of Alotech Walls & Ceilings yesterday, liquidator Bernie Montgomerie said an action might be brought against the sole director and ultimate owner, Jack Lockhart, requiring him to contribute to the $3 million losses.
Many of the 150 creditors were small subcontractors hired by Alotech instead of PAYE employees.
Also under scrutiny is the March sale of Alotech's 100 per cent shareholding in Link Distributors.
The company's accountants had estimated Link's net profit in the March year at between $400,000 and $500,000, with projected shareholder funds of $540,000.
It was sold for only $5000 to an associated company, Alotech Holdings, owned by Mr Lockhart and his wife.
The liquidator is taking legal action under the Companies Act either to recover the under-value or set aside the sale.
Action may also be taken against the director for possible breaches of good faith and reckless trading.
"We believe this entire transaction was an instrument to gain an advantage for Mr Lockhart and/or his associated interests to the detriment of the creditors of the company," Mr Montgomerie said.
The liquidator is considering using litigation funding by a third party to pay for legal action against the director.
In a landmark decision earlier this year, the High Court gave the go-ahead for an Australian-based company to bankroll a $2.17 million lawsuit brought by Montgomerie & Associates against five company directors.
In the Alotech case, voidable transaction notices have been served on Link to recover approximately $580,000 paid to Link in the four months before the subsidiary was sold.
The ANZ Bank assigned its debenture to Link in April after Link lent $359,000 to Alotech to repay the bank.
Link used this debenture to appoint receiver Anthony McCullagh one month later.
The liquidator was appointed by the court in June on the application of the largest creditor, Impeys Hardware, owed $1.3 million.
The liquidator is trying to have the receiver removed, claiming Mr McCullagh's appointment was invalid.
Mr Lockhart's lawyer, Brendon Meech of Rudd Watts & Stone, told creditors that Mr Lockhart had to mortgage his family home to raise the money to pay the ANZ.
The receiver appointed Alotech's former contracts manager, Peter Anderson, to complete work on the Sun Alliance project in order to secure around $200,000 of retentions.
Mr Lockhart blamed his company's demise on payment disputes with Hartner Construction, head contractor on several waterfront projects.
The liquidator said Alotech did not help itself by abandoning the Hartner contract after negotiating a substantial payment.
Associate Commerce Minister Laila Harre has just endorsed a proposal for new laws to protect subcontractors better by abolishing pay-when-paid provisions.
Cheap sale of company dubious says liquidator
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