We picked the good faith defence in the voidable preference regime as one of the big five insolvency issues for 2013 and so it has come to pass, with a wealth of case law on the topic.
Contents Section Page New Zealand in a Nut Shell 1 Business Landscape 2 Overseas Investment Regime 6 Immigration 10 Structuring the Business 13 Capital Markets and Takeovers 17 Tax 21 Trade Practices 28 International Trade 32 Intellectual Property 34 Employee Relations 36 Real Property and Resource Management 40 Taking Security over Personal Property 42 Corporate Insolvency Law 44 Climate Change and Emissions Trading 47
New Zealand in a Nutshell
A case recently heard in the UK suggests that, in certain circumstances, a claim for conversion of assets may be brought against administrators and liquidators of a company. While the claim did not succeed on the facts inEuromex Ventures Ltd & Anor v BNP Paribas Real Estate Advisory & Ors [2013] EWHC 3007 (Ch), the case illustrates that claimants may bring a proceeding on the basis of alleged acts of conversion by a company's liquidators and administrators.
In our December 2012 insolvency update we reported on CP Asset Management Ltd v Grant, in which the High Court upheld a creditors' resolution to appoint new liquidators. The High Court found that a resolution should only be set aside when it was found that the prejudice to creditors was unreasonable. In the High Court, the minority of creditors who voted against the resolution were unable to e
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).
The High Court has held that liquidators cannot rely on the common law to recover insolvent transactions, and must now proceed under the statutory provisions of the Companies Act.
In Grant v Lotus Gardens Limited, the liquidators of Quantum Grow Limited applied unsuccessfully for an order that Lotus Gardens Limited be put into liquidation on the grounds that it was unable to pay its debts, asserting that Lotus Gardens owed it $25,000 being the amount of preferential payments made to them.
Receivers are well aware that they can limit or exclude their personal liability on a contract by appropriately worded language, in accordance with the Receiverships Act. But what about litigation? Is a receiver sufficiently protected against a personal costs award if the litigation is in the name of the company rather than the receiver?
The “good faith” defence for creditors facing insolvent transaction claims has now been fully explored by the Court of Appeal in two separate judgments relating to the Farrell v Fences and Kerbs Limited1 litigation – and has been confirmed on all points to have narrow application.
Confirmation by the Court of Appeal that “accounts receivable” are more than just book debts and include other legally enforceable monetary obligations owed to a company will provide welcome certainty to receivers and liquidators.
The issue is significant because it determines the assets available to pay preferential claims.
In Commissioner of Inland Revenue v Property Ventures Limited (in Liq & In Rec), the liquidator of Property Ventures Limited (in liq and rec) obtained orders requiring the New Zealand Police to produce computer equipment holding certain company records. The Police obtained the relevant information from the offices of a Mr Henderson, following a complaint by the liquidator alleging a failure to comply with notices issued under section 261 of the Companies Act 1993.