In our March 2012 update we reported on a claim under section 294 of the Companies Act 1993 by the liquidators of Five Star Finance Limited (in liquidation) (FSF) against a trustee of a trading trust (Bowden No. 14 Trust (Trust)) to set aside payments amounting to $928,937.79.

Armitage v Established Investments Limited (in liq) involved an appeal by an undischarged bankrupt (A), against a High Court decision imposing conditions that A was not to engage in business for three years following discharge at the end of his bankruptcy. The High Court had also ordered that the period of bankruptcy was to be extended for three years beyond the statutory three year period, although A did not challenge this aspect of the High Court decision.

The Court of Appeal has reversed the High Court’s decision in Healy Holmberg Trading Partnership v Grant on a PPSA issue it describes as being of “practical significance”. 

If a liquidator is found guilty of stealing money from a company in liquidation, most creditors would assume that he or she could never be a liquidator again. Not in New Zealand. A recent case highlights the need for urgent reform of the regulation of insolvency practitioners.

The lessons to be drawn from the Crafar receivership in relation to the Personal Properties Securities Act (PPSA) have now been distilled by the Court of Appeal, which has largely confirmed the High Court’s reasoning.

We discuss the implications of the litigation.

When insolvency practitioners consider who may be held accountable for corporate failures, auditors are often near the top of the list. It is easy to see why. From a practical perspective, auditors are relatively likely to be able to meet good claims, and from a legal perspective it is easy to identify the duties that the auditors owed and, in an unfortunate number of cases, breached.

Justice Heath issued a sweeping judgment last month limiting the ability of liquidators to examine witnesses and seek documents. In the decision, ANZ National Bank Ltd v Sheahan and Lock [2012] NZHC 3037, the Court also:

The High Court recently allowed a secured party to amend financing statements to correct a mistake as to the identity of the debtor, without losing the benefit of its initial time of registration. 

The case was determined in the context of an application by Universal Trucks and Equipment Limited to maintain the registration of security interests.  The liquidator of Chars Transport Limited (in liquidation) had made a demand under section 162 of the PPSA that Universal register a financing change statement that excluded two industrial trailers. 

A recent case alleging serious misconduct by a liquidator highlights the need for New Zealand to reform the regulation of insolvency practitioners. The case, Official Assignee v Norris [2012] NZHC 961, illustrates the inadequacies of our current regime.

In Gibbston Downs Wines Limited and RFD Finance No 2 Limited v Perpetual Trust Limited HC Christchurch CIV-2010-409-00176 28 May 2012, the High Court considered the effect of registration of a subordination agreement on the respective priority of two perfected security interests registered on the Personal Properties Securities Register (PPSR).