Tax debt hidden from me: NZNet director

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A former Forsyth Barr stockbroker who poured $460,000 into a now-failed internet business
says another director concealed its tax debts from him.

Rowan Johnston told the High Court at Auckland yesterday he would never bought into NZNet
if he had known about the tax debt nor would he have loaned more money to the internet provider if he was aware of it.

Johnston is one of three men being chased by NZNet Internet Services' liquidators for compensation after the company collapsed in 2011 owing creditors more than $1.1 million.

The liquidators, Damien Grant and Steven Khov, have alleged that Johnston - with fellow NZNet directors Stephen Andrews and George Thomas - elected to trade while the company was insolvent.

The three men are accused of reckless trading, of failing to exercise the skill and diligence
of a reasonable director and of failing to keep proper accounting records.

Johnston gave evidence in the High Court yesterday and said he was approached about buying
shares in NZNet by Andrews, who had been with the company since it began.

The pair had known each other for over 30 years and Andrews had been Johnston's bible class
teacher at their church.

After due diligence, Johnston initially invested $260,000 in the business and became a director
at the end of 2009. He continued to loan it money when he was on its board and poured a total of $460,000 into the company by the time he had resigned in September 2011.

But Johnston said NZNet's tax debt was not disclosed to him before he invested.
"At no time was I aware money was owed to IRD," he told the court.
The IRD is now claiming $386,000 from NZNet's liquidators.

During the Johnston's time on NZNet's board, Andrews concealed the tax debt from him, the
witness said yesterday.

When he found out of the amount owing in a letter from IRD in September 2011, he quit the
company, Johnston told the court.

Johnston said yesterday that he was of the firm belief that he made "every effort possible" to make the business was a success, including monitoring the activities of other directors.