The Court of Appeal has found that receivers can be personally liable for body corporate levies accrued during a receivership.
The judgment is based on a broader interpretation of the relevant provisions in the Receiverships Act 1993 than applied by the High Court in Body Corporate 162791 v Gilbert, and reverses that decision.1
How does the objective of achieving payment for creditors in insolvency interact with the objectives of pension legislation, which seeks to ensure that individuals are adequately provided for in retirement? The courts in New Zealand and in the UK have each recently grappled with this issue. In both of the recent cases considered in this article the pensions objectives won out and the specific pension funds in question were not made available for the bankrupt individual's creditors.
Over the last couple of years, we have developed the habit of periodically pushing up the periscope to try to determine the ‘big five’ insolvency issues on the horizon.
Below is a retrospective assessment of how we did last time and our best guess as to what will dominate the next 12 months.
The big five for 2015
If asked to provide information to a liquidator, the safest course may be to provide it under oath under section 261 of the Companies Act 1993 because the High Court has found that immunity will apply to such statements.
We look at the decision.
The case
In Body Corporate 162791 v Gilbert [2014] NZHC 567, the High Court found that receivers are not personally liable under s 32(5) of the Receiverships Act 1993 (the Act) for body corporate levies under the Unit Titles Act 2010.
The facts
Admiralty proceedings against a vessel are necessarily territorial in nature. A debtor’s vessel may sail into a certain jurisdiction and be arrested and sold for the benefit of creditors who both have Admiralty in rem claims against the vessel and actively take the required steps in the Court proceeding concerned. Creditors not having rights of claim of that nature would miss out or only have a very low priority in respect of the proceeds of sale.
Liquidators are not limited to the procedure set out in section 295 of the Companies Act to recover a debt once an insolvent transaction has been set aside.
More than two years after the Commerce Committee reported back on the Insolvency Practitioners Bill, Parliament took up the second reading of the Bill late last week – the next step in what has been a long and protracted process.
The original Bill proposed a negative licensing regime, under which the Registrar of Companies would have the power to prohibit individuals from acting as insolvency practitioners.
In Strategic Finance Limited (in receivership & in liquidation) and Strategic Nominees Limited (in receivership) v Bridgman and Sanson CA 553/2011 [2013] NZCA 357 the Court of Appeal has, for the moment, settled what constitutes an "account receivable", and this provides certainty regarding the scope of the assets available to meet preferential creditor claims ahead of secured creditors with general security agreements.
Inland Revenue is now ahead of liquidators and receivers in the queue for payment where cash is available in liquidation and PAYE is owed.
Industry practice has been that PAYE is paid to the Commissioner of IRD only after the insolvency practitioners’ fees and employees’ wages have been paid but the Court of Appeal has accepted the IRD's argument that the Commissioner has first claim.1