2023 Restructuring & Insolvency Year in Review Year starts with fears of banking collapse contagion State-backed rescue deal for Credit Suisse announced 10 March 19 March Silicon Valley Bank, centred in California and focussed on funding venture capital and startups, was shut down by its local regulator on 10 March 2023 with the Federal Deposit Insurance Corporation appointed as receiver and the UK bank was sold to HSBC over the course of a weekend. Crypto-exposed Silvergate Bank and Signature Bank both followed suit – all within the span of five days.

Last month, online supermarket Supie went into voluntary administration, owing $2.1 million to more than 4,000 creditors with only $179,000 left in the bank. 118 employees of Supie found out not only that they had lost their jobs, but that it was unlikely they would be paid for their last 2 weeks of work, or for any outstanding holiday pay.

Thanks to an anonymous donor, some wages were able to be paid out. However, the first liquidators report shows that $120,797 in wages and holiday pay is still outstanding to 89 employees. So, what are employees of a failed company entitled to?

Two recent cases from New Zealand demonstrate how an equitable lien can arise in insolvency to elevate the interest of unsecured purchasers of goods to secured status.

Key takeouts

In FamilyMart China Holding Co Ltd (Respondent) v Ting Chuan (Cayman Islands) Holding Corporation (Appellant) (Cayman Islands) [2023] UKPC 33, the Privy Council has provided useful guidance about the interplay between an arbitration agreement and exercise of the Cayman court’s powers and discretion to wind up a company on just and equitable grounds.

Contractor insolvencies are continuing in the construction industry in 2024. This follows recent challenges relating to supply chain issues, labour shortages, and increased material costs. Such challenges are part of the broader macroeconomic climate of high inflation and interest rates.

We outline below steps that a Principal can take at different stages of a project to mitigate the impact of Contractor insolvency on its project, and to protect its interests.

Key takeaways

Hot on the heels of the review of NZS3910, AS 4000-1997, a key Australian standard form construction contract for more than 27 years, is currently being reviewed. This form, or variants of it, is sometimes used in New Zealand and various jurisdictions in the Pacific.

When Cash is King but it's running short - what do directors need to know?

The general sentiment for 2024 is that challenges still lie ahead for business owners before things will improve. How will those challenges impact your business?

Directors need to be aware that in times of doubtful solvency the law requires them to at least have regard to the interests of creditors as well as shareholders, and getting it wrong can attract significant personal liability.

In Arab v Pan, in the matter of Pan (No 3) [2024] FCA 563, the Federal Court of Australia addressed critical issues concerning the scope and compliance of summonses for production in bankruptcy, which will also impact corporate insolvency proceedings and such proceedings in other common law jurisdictions.

Our prediction

With New Zealand’s economy in recession, we predict an increase in insolvency-related disputes and litigation over next 12-months.

Why?

A variety of factors combine to give rise to the expected uptick in insolvency-related claims:

This article considers the New South Wales Supreme Court’s decision to grant leave to proceed against non-appearing foreign defendants, which were in foreign insolvency proceedings.

There has been a significant growth of litigation in Australia where there is at least one foreign defendant. This is unsurprising given the growing number of international agreements under which the parties govern their contract under Australian law and expressly agree to Australian court jurisdiction, and the volume of global trade with Australia and foreign direct investment.