Introduction

The credit crisis has led to many opportunities for financial and strategic buyers to purchase all or part of a business or assets from financially troubled companies at significantly discounted prices. In such deals, buyers run the risk that the transaction may be set aside on the basis of voidable preference rules (the so-called 'actio pauliana').

On November 1 2007 the State Commission for Insolvency Law presented the Preliminary Bill for an Insolvency Act to the minister of justice. The most important changes to the existing Bankruptcy Act are outlined in this update.

Tax treatment in the hands of the creditor

FTG Securities Limited involved an application by FTG Securities Limited (FTG) for declarations as to the interpretation of a Deed of Priority.  The Deed of Priority was entered into by Canterbury Finance Limited (CFL) and a bank with respect to the security interests in Tuam Ventures Limited (in Rec and in Liq) (TVL).  Declaratory relief was sought against the bank and the receivers of TVL.  An issue raised by way of an affirmative defence was whether the assignment of TVL's debt and securities to FTG is valid from a technical legal perspective and therefore wh

The Commissioner of Inland Revenue (Commissioner) appealed a decision of Associate Judge Christiansen to approve a payment proposal by Mr Wilson to discharge a debt he owed the Commissioner and thereby avoid a declaration of bankruptcy. 

The Supreme Court’s decision in McIntosh v Fisk has confirmed how the courts will deal with claw back claims under the voidable transactions regime in the context of Ponzi schemes. Liquidators’ recoveries will be limited to the fictitious profits for which there was no value given.

In Body Corporate 341188 v Kelly, a judgment debtor sought to overturn an Associate Judge's decision not to set aside a bankruptcy notice.  The notice was in respect of a District Court judgment and a costs order obtained by the Body Corporate in a separate High Court proceeding.  The debtor argued (among other grounds) that the notice was invalid because it was in respect of two judgment debts rather than one.

Jellie v Tannenberg Limited concerned an application by the defendant, Tannenberg, to stay liquidation proceedings against it. Tannenberg claimed not to have been served with a copy of the statutory demand or liquidation proceedings. Instead, Tannenberg alleged that it first heard of the liquidation proceedings when they were advertised in the New Zealand Herald. In addition to the issue in respect of service, Tannenberg disputed the underlying debt on which the statutory demand was based.

Mr Maharaj owned a building company. Ms Nandani, his wife, owns a residential property. Mr Maharaj needed funding, which he could not obtain. However, the necessary funds were loaned to Ms Nandani and secured over her property. Ms Nandani subsequently contended that:

In Intext Coatings Ltd (In Liquidation) v Deo, the High Court was again asked to consider the limits of the equitable remedy of tracing (previously considered here). In particular, the Court was asked to consider the circumstances in which 'backward tracing' (the tracing of trust funds used to repay a debt into the asset over which that debt arose) is available.