The Supreme Court has today considerably expanded the “good faith” defence for voidable transactions.
Where a creditor “gave value” through the original transaction, that creditor can now defeat a voidable transaction claim by proving only that it acted in good faith, with no suspicion of insolvency.
The Court of Appeal has confirmed that if a secured creditor votes its secured debt in a liquidation meeting, the vote is invalid – and the security remains.
Liquidation meetings are for unsecured creditors. A secured creditor has no vote, except in respect of debt that is unsecured.
The case
A bankrupt’s KiwiSaver account balance is off limits to the Official Assignee. Even if it were not, the Official Assignee could not use the bankruptcy to invoke the hardship-based early withdrawal provisions in the KiwiSaver Act 2006.
This is the effect of a Court of Appeal judgment, delivered on Friday. Although justifiable in policy terms, the decision raises issues about the appropriate balance between promoting retirement savings and protecting creditor rights.
Significance
“The peak indebtedness rule is not part of the law in New Zealand”, according to the Court of Appeal, in a decision dismissing two appeals on an issue “significant for both liquidators and creditors generally”.
Terms of Trade
Ensure your Terms are robust
The Court of Appeal has found that receivers can be personally liable for body corporate levies accrued during a receivership.
The judgment is based on a broader interpretation of the relevant provisions in the Receiverships Act 1993 than applied by the High Court in Body Corporate 162791 v Gilbert, and reverses that decision.1
How does the objective of achieving payment for creditors in insolvency interact with the objectives of pension legislation, which seeks to ensure that individuals are adequately provided for in retirement? The courts in New Zealand and in the UK have each recently grappled with this issue. In both of the recent cases considered in this article the pensions objectives won out and the specific pension funds in question were not made available for the bankrupt individual's creditors.
Over the last couple of years, we have developed the habit of periodically pushing up the periscope to try to determine the ‘big five’ insolvency issues on the horizon.
Below is a retrospective assessment of how we did last time and our best guess as to what will dominate the next 12 months.
The big five for 2015
If asked to provide information to a liquidator, the safest course may be to provide it under oath under section 261 of the Companies Act 1993 because the High Court has found that immunity will apply to such statements.
We look at the decision.
The case
More than two years after the Commerce Committee reported back on the Insolvency Practitioners Bill, Parliament took up the second reading of the Bill late last week – the next step in what has been a long and protracted process.
The original Bill proposed a negative licensing regime, under which the Registrar of Companies would have the power to prohibit individuals from acting as insolvency practitioners.