Rowmata Holdings Limited (in liquidation) (RHL) & Anor v Hildred & Ors [2013] NZHC 2435 involved a sale and purchase agreement whereby land was sold to two trusts, subject to finance. RHL (a company incorporated by the purchasing trusts) claimed and received a GST refund for the purchase. However, on settlement date, RHL defaulted on the purchase, went into liquidation, and the GST refund became repayable to the Inland Revenue Department (IRD).

Voidable Transactions

Can be a significant risk for businesses

When an insolvent company goes into liquidation it’s accepted that not all creditors will get paid 100 cents in the dollar.However it often comes as a shock to creditors when the liquidator requires them to refund payments that had been made up to two years before the company was liquidated.

The High Court has found that a bankrupt member’s interest in a KiwiSaver scheme is available for distribution by the Official Assignee to creditors – but only after the bankrupt qualifies for a withdrawal (which will usually be at age 65) unless early partial release would alleviate the bankrupt’s significant financial hardship.

Three times in the last 12 months, liquidators have been told by the High Court that they cannot choose the “point of peak indebtedness” as the start of the “continuing business relationship” in an insolvent transaction claim. 

Of course, the three decisions are all from the High Court, and will not be binding in future cases.  The law will not be settled until the appellate courts hear the issue, and they may yet come to a different conclusion.

The Court of Appeal last week extended the armoury available to liquidators seeking to unwind a voidable transaction. Although the Companies Act sets out a procedure for liquidators to follow, the Court held that this is not exclusive, and that liquidators can also serve a statutory demand seeking payment of a voidable debt. Is this a shortcut likely to save costs, or is it a false economy?

The voidable claim

In Dench v Gates, the New Zealand High Court considered its inherent jurisdiction to set aside a bankruptcy notice to prevent an abuse of process. Mrs Gates, the judgment debtor, had applied to the High Court to set aside a bankruptcy notice. The bankruptcy notice was based on an award of costs against Mrs Gates in respect of earlier District Court litigation initiated by her against Mr Dench, a solicitor, on the basis that he had conducted himself dishonestly while representing his client in a separate matter, in which Mrs Gates was the plaintiff.

Tegel sought summary judgment against Mr and Mrs Arnensen as guarantors of the obligations of Coastal Cuisine NZ Limited (In Receivership). The Arnensen's argued (in reliance on the equitable doctrine of marshalling) that Tegel ought not to be allowed to pursue the guarantees until the receivership of Coastal Cuisine had run its course.

In Bunting v Buchanan, the applicant shareholders sought discovery ahead of a hearing of their substantive application which involved the level of costs charged by two liquidators as a consequence of a drawn-out liquidation.

A recent decision of the High Court suggests that a creditor who has not objected to a notice given under section 292 of the Companies Act may be able to defend the claim at a later stage.

The High Court recently granted an application for an exemption from the requirement to send the liquidator's six monthly report to every preference shareholder of the company in liquidation. In FCS Loans Ltd (in liq) v Fisk & Anor, the High Court granted the liquidators' application for an exemption on the basis that the cost of supplying six monthly reports to the 3,141 preference shareholders (estimated to be $4,719.16) is not proportionate to any likely benefit to those shareholders from having the reports mailed to them.