The liquidator of failed PC retailer Cost Club has filed proceedings in the Auckland High Court against Cost Club director Mark Mahony and a paid out creditor.
The court action stems from Cost Club’s voluntary liquidation in April last year, when Cost Club management purchased selected assets from the company and set up Best Buy. Cost Club director Mark Mahony became sole director of Best Buy.
Cost Club liquidators Buchanan and Associates is taking legal action against Mahony, asking the court to set aside an agreement made when Cost Club was first incorporated with $300,000 capital.
Rather than pay cash for shares, Mahony exchanged his technical know-how, intellectual property and goodwill, which he valued at $300,000. This technical know-how, intellectual property and goodwill was consequently on-sold to Best Buy for $1000.
Mahony says the way the shares were paid up follows normal commercial practice and was neither unethical nor in any way illegal. There was substantial cash in the bank and the Cost Club brand and management expertise had substantial value.
Another action is being taken against Advertising Works, which received a $40,000 payout two days before Cost Club went into liquidation. Cost Club’s liquidator is claiming preferential payment. Advertising Works had taken action to have Cost Club wound up.