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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 22888
Experience:  38 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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Hi- My wife and I were previous owners and directors

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My wife and I were previous owners and directors of a company which we sold and has now been deregistered and no longer trading.
Prior to selling the company a party in the Waikato who had been purchasing our product on a trade basis approached us requesting he become a distributor.
We agreed subject to his paying $20,000 to the company and entering into a distributor agreement.
He agreed and began paying off the $20,000 in $5,000 installments, however he did not agree with some of the conditions in the agreement and requested ammendments be made.
Some of these we agreed to, apart from the changes he wanted made to the performance clause and to the term of the agreement- these we did not agree with and requested he abide by the original requirements if he wanted to become our distributor.
These discussions continued, in the interim he continued to purchase our product although we charged him at the lower distributor's price rather then the more expensive trade price he had been paying previously.
The prospective distributor also continued to pay the $5000 installments to the company.
While the negotitons were continuing my wife and I had the opportunity to sell the company, so while these negotiations progressed we informed the prospective distributor to suspend the $5000 installments until the sale of the business was confirmed, up to that time he had paid $15,000.
The new owners of the business formed a new company and continued discussions with the distributor -in the interim my wife and I deregistered our business and ceased trading.
Some 6 months afterwards the distributor decided he did want to continue as a distributor with the new owners.
At that stage he wanted the $15,000 repaid and requested the new owners pay him-the new owners checked their legal position with their lawyer and were advised they were not liable, he therefore began to pursue my wife and I for the money.
We were not prepared to do so as it was established the man had taken on a distributorship with one of our competitors and had agreed to a performance clause with this company, this we believe this was the reason why he wanted our performance clause removed.
It was also observed when the man became a distributor for the opposition company our sales in the Waikato dropped from between $150,000 and $200,000 per month to virtually zero- It was only when my wife and I began to promote our product ourselves in the Waikato and started taking sales off him that he approached us to become the exclusive distributor for our product for the Waikato.
Some 18 months have transpired since we sold the business and the man has now advised he intends taking legal action to recover the $15,000 - Our opinion is he only wanted to become an exclusive distributor to stop us from selling our product in the Waikato, as a result whilst the negotiations continued we suffered a great deal more than $15,000 in lost sales.
To sum up however we fail to see how he can now sue us for the $15,000 as individuals as the money was paid to the company not us as individuals,which has been deregistered and ceased trading.
Your advice would be greatly appreciated.
Yours faithfully -Stuart Goudie

Chris The Lawyer : Hi and welcome. My first response will follow shortly. Please feel free to follow up if anything is not clear.
Chris The Lawyer : if all the contractual documents were with the company, then he cannot sue you as individuals. The whole purpose of setting up a company is to establish a separate legal entity, and therefore there is no cause of action (which is the legal term for a case to sue) any entity or individual except the company.
Chris The Lawyer : This is before the claim is even considered on the merits, which sound pretty doubtful in my view. If he paid something for this right to distribute, and commenced trading, then I cannot see how he can ask for a refund. But perhaps he has some notion that his failure to perform was your fault. In any event he is unlikely to get anywhere from what you have described.
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