The liquidators of Bella Vista Homes have written to the company's two former directors and law firm demanding repayment of more than $2 million and alleging a breach of the Companies Act.
The recovery demand is in relation to the buyout of former director and shareholder Daniel De Martin, which took place one year and three months before Bella Vista Homes went into liquidation in November 2017.
The amount now sought by the liquidators has increased from the buyout figure previously reported, which the liquidator said was "due to an investigation undertaken to determine the actual dollar value in both cash and assets transferred as payment to Mr De Martin".
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Rhys Cain, a Christchurch-based insolvency practitioner with the company EY, told the Bay of Plenty Times this week that letters had been sent to former directors Danny Cancian and Daniel De Martin, as well as the law firm representing the company at the time.
The Bay of Plenty Times has learnt that was Tauranga-based Simply Law.
Cain said the letters outline De Martin's share purchase transaction and demand repayment of it.
"We're looking for full repayment of the share purchase value."
He would not provide the exact amount but confirmed it was more than $2 million.
"We've written to all the relevant parties outlining our position, and we are now waiting for their respective legal representatives to come back to us with their views on it."
If this claim was not settled, the next step would be court action, Cain said.
De Martin – who, the liquidators have previously said bought his 50 per cent shareholding in Bella Vista for $5000 – walked away with a large settlement in August 2016.
He was bought out by his business partner and fellow shareholder Danny Cancian.
De Martin was also removed as a co-director of the company.
The Bay of Plenty Times reported in May that, according to Xero accounts, the $1,575,073.80 settlement included a $1.3 million cash lump sum, $8000 paid out over eight weeks, and the transferring of assets worth more than $73,000.
There were two other payments for sections, the value of which were unknown in May.
Cain said the total value of the buyout was now determined to be more than $2 million and, while not providing specifics about the increase, claimed there were a number of assets transferred that previously had no value specifically attached to them.
He alleged Cancian took money out of the company to pay De Martin for the shares.
It is understood the liquidators are now also alleging a breach of the Companies Act under section 76 – "financial assistance by a company in the purchase of its own shares".
The Act says such financial assistance has to be in the best interests of the company and the company has to, immediately after the giving of the financial assistance, satisfy the solvency test.
"We have also reviewed the advice given by the company's solicitor at the time of the transaction and whilst the solicitor who gave the advice is no longer at the firm, we have asked the law firm to comment on that," Cain said.
Simply Law director Barry Rodgers told the Bay of Plenty Times: "I acquired Simply Law in mid-2016 after it had already provided advice to Bella Vista Homes Limited on the transaction the liquidators are scrutinising.
"Notwithstanding that, to date, we have worked constructively with the liquidators to investigate their concerns, and we will continue to do so."
Cain has previously stated that De Martin's buyout "severely harmed" the operations of Bella Vista Homes.
He has also said while De Martin and Cancian did sign an agreement, no independent valuation was done on the company before the buyout.
Cancian confirmed earlier this year that no valuation was done before the buyout and agreed it "severely harmed" operations of Bella Vista Homes and was one of the reasons for it going into liquidation.
Bella Vista Homes went into voluntary liquidation on November 30 last year, leaving behind unfinished houses and millions of dollars in outstanding debts to creditors.
The latest liquidators' report showed Bella Vista Homes had just $28 with which to pay more than $4m to creditors.
The Bay of Plenty Times has tried to contact both De Martin and Cancian.
Meanwhile, building supplies firm Carters is also chasing Cancian for more than $1 million it claims it is owed.
Carters has taken Bella Vista to the High Court to seek $1,078,668, which it says it is owed for products supplied to the company over the course of 11 months.
The company claims Cancian personally guaranteed the firm would be able to make punctual payment of money owed.
It sought a summary judgment against Cancian, which is a bid to get a result without having to go full trial.
Cancian, on the other hand, claims he entered a deed of guarantee agreement by misrepresentation, and only personally guaranteed $50,000.
Associate Judge Peter Andrew said there was arguable defence of misrepresentation in regards to the $50,000 personal guarantee.
The judge said there was evidence to suggest Carters was keen to obtain Bella Vista's business.
In a decision released publicly last week, he dismissed Carters' summary judgment application.
That means a longer hearing will be required if it wishes to pursue the claim.