In Erceg v Erceg1 the New Zealand Court of Appeal ruled on the standing of bankrupt beneficiaries to bring claims against trustees. In addition, the Court considered the role of trustee discretion when determining beneficiary access to trust documentation. The decision is useful for trustees and beneficiaries alike, and provides clarity on the steps a Court may take when deciding whether or not to grant beneficiaries disclosure of trust information. Although this is a New Zealand decision, other common law courts such as Hong Kong may reach similar conclusions.
A High Court finding this month that a liquidator fabricated a key document and failed to account for receipts of over half a million dollars highlights the need for regulation of the insolvency profession.
The case
The liquidator, Geoff Martin Smith, claimed to have sent a notice under section 305 of the Companies Act to the bank holding security over the company in liquidation. The notice required the bank’s election, in default of which its security would be deemed surrendered. The bank said it never received the notice.
The High Court has issued its first major decision under Part 15A of the Companies Act, rejecting a multi-faceted challenge by Cargill International to the Solid Energy Deed of Company Arrangement (DOCA).
The ruling provides important guidance on the operation of New Zealand’s voluntary administration regime.
Chapman Tripp acted for Solid Energy’s lenders, the fourth respondents in the proceeding.
Background
The Ministry of Business, Innovation and Employment (MBIE) is proposing law change after the Court of Appeal ruled that KiwiSaver funds are beyond the reach of the Official Assignee.
The effect of the ruling is to provide a higher level of protection for KiwiSaver balances than for other forms of retirement savings.
MBIE is seeking feedback on a range of options to create a uniform policy approach to the use of retirement savings in bankruptcy.
Submissions close on 30 September 2016. We encourage you to make a submission.
Background
The Court of Appeal has dismissed an appeal by Steel & Tube Holdings Limited (STH) against the legal basis and quantum of a $750,000 judgment based on a “de facto amalgamation” with its subsidiary company.
The ruling reinforces the message from the High Court that directors must be careful to maintain a subsidiary’s independence if they are to protect the parent against liability for the subsidiary’s debts.
The context
In our June 2016 update, we discussed the Court of Appeal's decisions in Madsen-Ries v Petera[2016] NZCA 103, Calvert v Reynolds [2016] NZCA 151, and Petterson v Browne [2016] NZCA 189. In all three cases leave was sought to appeal to the Supreme Court. Leave was granted to the applicant companies in Petterson v Browne, but declined in all other cases. 
In the recent High Court case of McKay v Johnson & Smith [2016] NZHC 1691, a liquidator, Geoff Martin Smith, allegedly sent a notice under s 305 of the Companies Act 1993 to the bank that had security over a company in liquidation. The bank did not respond to the notice and Mr Smith alleged that the bank had lost its security. The bank maintained it never received the notice.
The Court was satisfied that the notice had been fabricated because:
In Advicewise People Ltd v Trends Publishing International Ltd, four creditors of Trends Publishing International Ltd (Trends) successfully challenged a compromise approved under Part 14 of the Companies Act 1993.
The High Court's ruling in Priest v Ross Asset Management Ltd (In Liq) [2016] NZHC 1803 arose out of the devastation of the Ponzi scheme effected by David Ross of Ross Asset Management Limited (In Liquidation) (RAM) and Dagger Nominees Limited (Dagger). For many years RAM and Dagger reported spectacular returns for investors before their illusion was revealed, the Financial Markets Authority became involved and liquidators were appointed.
The Supreme Court has recently denied leave to appeal a judgment concerning the application of the continuing business relationship to voidable transactions under section 292(4B) of the Companies Act 1993.