The liquidators of two Cayman Island companies obtained orders under s 195(3) of the Bermudan Companies Act 1981 for PwC, as the companies' auditor, to provide information and documents to the liquidators. PwC decided to appeal but, in the meantime, did US$250,000 of preparatory work necessary to enable compliance, if required, with the orders.
As a result of the appeal, both orders were set aside. In PricewaterhouseCoopers v SAAD Investments Co Ltd & Anor (Bermuda) PwC applied to recover from the liquidators the costs of preparing to comply with the orders.
In our April 2019 newsletter we reported on the High Court judgment in Mainzeal Property Construction Limited (in liq) & Ors v Yan & Ors [2019] NZHC 255. The directors were ordered to contribute $36m to Mainzeal’s assets to be distributed to creditors. The Court found that Mr Yan was the most culpable director and had induced the other directors to breach their duties.
The English High Court ruled that prospective emergency legislation to amend insolvency laws due to the COVID-19 pandemic could not prevent liquidation proceedings from being brought. In Shorts Gardens LLP v London Borough of Camden Council [2020] EWHC 1001 (Ch) applications were made by two companies to restrain local councils from bringing liquidation proceedings in respect of unpaid rates and costs orders.
On 10 October 2019 the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, announced an upcoming inquiry into insolvency practices. The inquiry was announced in light of rising concerns as to the efficacy of the voluntary administration process for SMEs and family-owned businesses, and concerns with the conduct of insolvency practitioners more generally.
Creditors' compromise Part 1: the New Zealand Supreme Court view
The Supreme Court has recently confirmed that the courts will adopt "a practical business approach (as against one which is unduly technical)" to the determination of due debts when considering a company's ability to pay its due debts.
Arena Capital Limited (Arena) was a Ponzi scheme. Arena's liquidators applied under s284(1)(a) of the Companies Act 1993 for directions regarding the distribution of assets under liquidation.
The Court held that dividing the assets into trust assets and general assets was inefficient in the circumstances and ordered a "common pool approach." The Court ordered distribution on a pro rata, pari passu basis. The investors had borne the same degree of risk and it was not cost-effective to trace the numerous small contributions.
Commercial Factors Ltd v Meltzer concerned a funding agreement between Commercial Factors Ltd (CFL) and the liquidators of Blue Chip New Zealand Ltd (in liq) (Company) by which CFL agreed to lend $67,750 to allow the liquidators to obtain an opinion on the merits of claims against the Company's directors.
If proceedings were commenced, the Company was to pay 2.5% of any proceeds received to CFL. If the Company did not commence proceedings but otherwise received funds, the agreement stipulated CFL's right to repayment after any liquidator costs.
Deep Purple was, and still is, a rock music band. Its members included Mr Gillan, Mr Glover and Mr Paice. In 2005, band members entered into an agreement with HEC Enterprises Limited (HEC) and Deep Purple (Overseas) Limited (DPO). Under that agreement, the parties agreed to form a new company named Purpletuity, to which various copyrights and other assets were to be transferred. In 2015, Mr Gillan, Mr Glover and Mr Paice commenced proceedings against HEC and DPO to enforce that agreement.
In Hampton v Minter Ellison Rudd Watts [2020] NZCA 291 the Court of Appeal found that ordering a stay of enforcement of a bankruptcy order would undermine the insolvency law regime.