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The owners of music store Real Groovy are being accused of relaunching at the expense of their creditors.
Real Groovy Records Ltd went into receivership in October and, while the chain's four stores remained open at first, it ceased its mainstay secondhand music trading business. Customers were also told they could no longer use credit notes or vouchers.
The Wellington and Christchurch stores were sold as going concerns and the Dunedin store closed.
The original owners, Chris Hart and Martin O'Donnell, regrouped with a new backer under the company name Fonografo Ltd and announced this month that the Auckland store was fully operational again.
However in the High Court at Auckland yesterday, the original company, Real Groovy Records, was put into liquidation by music distributor Southbound Distribution, which is owed more than $40,000.
Southbound director Jeffrey Stothers believed there were other creditors. He said he had been told that there were no surplus funds available from the sales of the stores to pay unsecured creditors.
Stothers was not against Hart and O'Donnell getting back into business, as the industry needed another record store closure "like a hole in the head", but he objected to it being done at distributors' expense.
Stothers said he outlined his position to Hart at an early stage, telling him Southbound could not keep supplying the store if it wasn't being paid.
"He was fairly indignant, saying he would have to look after the major record companies first and he would see what he could do."
Stothers said he was then forced to take action through the courts, with yesterday's liquidation the result.
Fonografo is not liable for Real Groovy Records' debts. The new backer of the Auckland store is Ralph Brayham, a director of Telecom subsidiaries Ferrit.co.nz and Yahoo!Xtra.
Hart said yesterday that he and his fellow Fonografo shareholders had bought the Auckland assets from the receivers, and he didn't know how much was available to pay creditors.
He said he could understand that people were feeling bruised and he had apologised for the business's failure.
But he said it was better that the stores kept trading. "[Suppliers] now have the opportunity to sell more of their product and recoup whatever they may have lost," he said. "I don't know what else I could do. I mean the bank would not lend me the money just to repay the creditors because I'd have no means then of repaying the bank."
Hart said many suppliers were still doing business with the store.
