Summer 2024 Editor: Melanie Willems IN THIS ISSUE “Seething on a jet plane” - conditions precedent and time of the essence in commercial contracts by Jack Spence 03 09 11 24 Diamonds aren’t forever: who is vicariously responsible when they have been stolen?

On May 16th, the DOL released interim final rules (the “Final Rules”) and an amendment to Prohibited Transaction Exemption 2006-06 (the “Amendment to PTE”), effective July 16, 2024, amending the DOL’s Abandoned Plan Program (the “APP”) to allow Chapter 7 bankruptcy trustees to use the APP to terminate, wind up, and distribute assets from a bankrupt company’s retirement plan.

The Aldrich Pump Texas Two-Step bankruptcy may have survived dismissal at the bankruptcy court level, but now the asbestos claimants have appealed to the Fourth Circuit following Judge Whitley's approval of their motion for direct appeal.1

The Fifth Circuit recently issued an opinion that increases the marketability of estate assets often viewed as untouchable. In In re S. Coast Supply Co. ("South Coast"), 91 F.4th 376 (5th Cir. 2024), the Fifth Circuit held that a bankruptcy "preference" action may be sold to a third party under section 363 of the Bankruptcy Code even if the buyer is not an estate fiduciary and does not represent the bankruptcy estate. A preference action is an "avoidance" claim arising under section 547 of the Bankruptcy Code.

On 30 November the Supreme Court delivered its written judgment dealing with the correct test for insolvency when considering the eligibility of a debtor for a Personal Insolvency Arrangement (PIA) under the Personal Insolvency Act 2012 (as amended).

Background

One of the qualifying criteria for a PIA is that the debtor must demonstrate that the debtor is “insolvent” within the meaning of section 2(1) of the Personal Insolvency Act 2012. That provision defines the term as meaning “that the debtor is unable to pay his or her debts in full as they fall due”.

This morning, after much anticipation, the Supreme Court has released its judgment in Yan v Mainzeal Property Construction Limited (in liq) [2023] NZSC 113, largely upholding the Court of Appeal's decision, and awarding damages of $39.8m against the directors collectively, with specified limits for certain directors. The decision signals that a strong emphasis on 'creditor protection' is now embedded in New Zealand company law.

While the economy continues to look positive on paper, the underlying issues stemming from recent inflation and ever increasing overheads continue to affect businesses. Against this backdrop and a year on from the commencement of the European Union (Preventive Restructuring) Regulations 2022 (SI 380/2022) (“the 2022 Regulations”) on 29 July 2022, it seems auspicious to remind directors of their duties to wind up a company in a timely manner or simply exercise good corporate governance and wind up companies that are no longer operational.

The High Court has delivered its written judgment on a recent decision that was the first of its kind by appointing an examiner to a company registered outside of the State, as it was established that its centre of main interests was in the Republic of Ireland.

In recent years much ink has been spilled opining on the so called 'Quincecare' duty of care, and the limits of it (see links to our recent insolvency law updates covering the topic below). The judgment in Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 was a first instance decision on Steyn J, in which he found that a bank has a duty not to execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer.

Our last newsletter commented on high inflation, dwindling business confidence and international supply chain issues. Those factors continue to influence the economic outlook, with some businesses unable to survive the strengthening head winds impacting the economy. The consumer price index increased 7.2 percent in the 12 months to December 2022, remaining stubbornly high despite significant movements in the official cash rate to 4.5%, up significantly from the 0.25% it was sitting at in October 2021. ANZ's economic forecast warns that a "policy induced recession is looming".