The Court of Appeal in Vance v Huhtamaki New Zealand Limited considered the ability of a receiver to limit his or her personal liability for post-receivership contracts under section 32 of the Receiverships Act 1993.

Justice Ellis recently confirmed the position applicable when a bankrupt applies for a stay of the decision adjudicating the debtor bankrupt pending appeal.

Mr Cary had been made bankrupt on 12 September 2011 as a result of a long outstanding debt to Trustees Executors Limited.  His opposition to the bankruptcy was based solely on the fact that Mr Cary thought he should be given more time to advance a proposal to creditors under Part 5 of the Insolvency Act 2006.  This was rejected by the Court for a variety of reasons, and the adjudication order made.

In Perpetual Trustee Company Limited v Downey & Black, the High Court discussed the effect of the liquidation process on a choice of forum clause in a commercial contract.  It found that as the subject company, HIH, had been placed into liquidation, the choice of forum clause between HIH and Perpetual (which designated the New South Wales Courts as the forum for resolution of disputes) did not automatically operate.  Instead, the question became whether the New Zealand or NSW courts were the more appropriate venue.

In the recent decision in Taylor v Official Assignee, the Court of Appeal overturned the High Court's dismissal of Mrs Taylor's appeal against the Official Assignee's decisions to set aside dispositions by Mrs Taylor to her family trust prior to her bankruptcy.

Mr and Mrs Taylor settled the family trust in October 2000.  The dispositions in question occurred between December 2000 and January 2007.  Mrs Taylor was adjudicated bankrupt in November 2006.

In Fenland District Council v Sheppard and others, FDC had spent £72,000 making a derelict property safe, which by the hearing date was worth less than half that amount. FDC registered the property improvements as an interest in the property, (indisputably) in priority to the prior mortgagee.

When the property's owner was adjudicated bankrupt, the bankrupt's trustee disclaimed the property (under a provision similar to section 117 of the NZ Insolvency Act). FDC sought to have the property vested in it, on the condition that the mortgagee's charge be removed.

In our October update, we reported on the Court of Appeal decision in Grant v Commissioner of Inland Revenue (see here).  The Supreme Court has now declined leave to appeal from that decision.

Recent decisions from the courts have raised the legal risk for directors and underlined the exposure to third party liability of auditors, trustees and promoters. 

As a result, we can probably expect this year to have more claims made by receivers, liquidators and out-of-pocket investors against those involved in:

The Insolvency Practitioners Bill is now unlikely to come into force until early 2013 due to the disruption caused by the election.  The Finance and Expenditure Select Committee’s report on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill will also be delayed until next year.

Insolvency Practitioners Bill

A recent Court of Appeal decision (Clark v Libra Developments Ltd [2011] NZCA 493), provides a useful guide to the general principles which apply to partners who do not have a formal agreement in place governing the dissolution of their partnership.

Receivers cannot escape personal liability on contracts they cause the company to enter into simply because all of the company’s assets have been paid out.

So the Court of Appeal found last week in a decision which explored the application of limitation of liability clauses where, as is common practice, the liability is limited to the “available assets” of the company.