It’s now official. Priority between competing security interests under the Personal Property Securities Act (PPSA) is assessed at the time those interests come into conflict. This will usually, but not always, be when receivers are appointed.
The PPSA is silent on the issue but the general view, now confirmed by the High Court, has been that the rule established in the Canadian Sperry1 case is the correct approach.
Making a payment to a creditor (in this case, the IRD) will in and of itself give that creditor priority over competing creditors. A recent Court of Appeal judgment to that effect, under section 95 of the Personal Property Securities Act (PPSA), carries serious implications for receivers.1
Receivers cannot escape personal liability on contracts they cause the company to enter into simply because all of the company’s assets have been paid out.
So the Court of Appeal found last week in a decision which explored the application of limitation of liability clauses where, as is common practice, the liability is limited to the “available assets” of the company.
The Supreme Court has affirmed the Court of Appeal’s finding in August of this year that a voluntary administrator may only use a casting vote at a watershed meeting where the number of creditors voting for and against a proposed deed of company arrangement (DOCA) is equal.
The Court of Appeal has affirmed the High Court’s ruling that a voluntary administrator may only use a casting vote where the number of creditors voting for and against the resolution is equal.
The second limb of the test, that the 50% represent at least 75% in value, cannot be the subject of the casting vote. Nor can the casting vote be used to choose between the number and the value.
Registration will be mandatory under the Insolvency Practitioners Bill as reported back to the House by the Commerce Committee. This is a radical and far-reaching change from the negative licensing regime initially proposed in the Bill.
This Brief Counsel summarises and comments on the Committee’s report.
Despite initial uncertainty, the Insolvency Practitioners Bill has been picked up by the new government. It will be amended by Supplementary Order Paper.
That SOP is yet to be released. Whether the amendments follow the direction agreed by the former Cabinet remains to be seen.
The Bill is on the Order paper under the name of new Commerce Minister Kris Faafoi. Chapman Tripp has been advised by the Leader of the House that Faafoi is awaiting advice from officials on “possible amendments”.
Liquidators cannot examine directors to obtain private financial information on which to judge their worth as prospective defendants.
This position was reinforced by the Court of Appeal in a recent decision.
The Supreme Court’s decision in McIntosh v Fisk has confirmed how the courts will deal with claw back claims under the voidable transactions regime in the context of Ponzi schemes. Liquidators’ recoveries will be limited to the fictitious profits for which there was no value given.
The Supreme Court this week provided clarification on the extent to which a disputed damages claim should be taken into account when deciding whether a “company is unable to pay its due debts".
At issue was whether the enquiry should be limited to those debts that were or were shortly to become legally due, or whether a more practical and commercial approach be taken? We look at the decision.