The much anticipated Mainzeal judgment is released

When a debtor has multiple creditors, often it seems as if there is no alternative but to throw in the towel and file for bankruptcy. Bankruptcy does have some advantages in that an individual is released from all his or her existing debts and that in three years (as long as no objection is filed in the Court) is discharged from bankruptcy. There are however downsides to bankruptcy.

On May 24, 2019, New Zealand-based online asset exchange, Cryptopia Limited, filed a petition under Chapter 15 of the United States Bankruptcy Code seeking recognition of its New Zealand liquidation proceeding in the United States. On the same day, the United States Bankruptcy Court for the Southern District of New York granted provisional relief to Cryptopia, including extending the benefits of the automatic stay to prevent creditors or other parties in interest from taking actions to interfere with Cryptopia’s assets.

In Robt. Jones Holdings Limited v McCullagh [2019] NZSC 86, the Supreme Court unanimously held that it is unnecessary for a liquidator to prove that any payment actually diminished the assets of a company to claw back that payment under s 292 of the Companies Act (Act). 

Non-party costs are exceptional and are only awarded when it is just to do so and when 'something more' about the non-party's conduct warrants costs.  The involvement of a parent company in litigation and avoiding a realistic settlement is an example of the 'something more' requirement being met.  In Minister of Education v H Construction North Island Ltd (in req and liq) [2019] NZHC 1459, the High Court found that McConnell Ltd's (McConnell) actions in this litigation warranted awarding non-party costs and disbursements of over a million dollars.

In Robt. Jones Holdings Limited v McCullagh [2019] NZSC 86 the Supreme Court confirmed that the requirements outlined in s 294 Companies Act 1993 (“Act“”) are all that is required in order to void an insolvent transaction. In particular, the Supreme Court confirmed there is no additional common law principle that the transaction must have diminished the net pool of assets available to creditors.

Background

An application by New Zealand Life Care Limited (Life Care) for an order reversing the decision of the Official Assignee to reject its claim for $4.9m in the bankruptcy of Mr Harman was dismissed by the High Court in New Zealand Life Care Ltd v Official Assignee [2018] NZHC 17.  Life Care said that Mr Harman had guaranteed loans from Life Care to his companies, but accepted that it did not have a written guarantee signed by Mr Harman.  Instead it relied on Mr Harman's admission of the guarantee in affidavits made after his adjudication.

The Hobson Apartments suffer from water tightness issues.  Unusually for a unit development, the top floor apartment on level 12 owned by the appellant Manchester Securities, owned the exterior of its unit including the roof of the building rather than the Body Corporate.  Severe water damage was identified in October 2009.  Following a series of High Court decisions and one Court of Appeal decision, Manchester Securities was required to contribute certain amounts to the Body Corporate for repair costs.

The Insolvency Practitioners Bill, which was first introduced to Parliament in 2010 by then Commerce Minister Simon Power, has been picked up by the new Commerce and Consumer Affairs Minister Kris Faafoi.  The Minister has released a Supplementary Order Paper, containing amendments to the Bill.  Included in those amendments is a system of registration of insolvency practitioners with an accredited body under a new, stand-alone Act.  This replaces the previous negative licensing regime originally proposed in the Bill whereby the Registrar of Companies was to be given the power

Mr Hampton was adjudicated bankrupt five years previously.  Following his public examination and the filing of the Official Assignee's report, the Official Assignee and Commissioner of Inland Revenue (a creditor) accepted Mr Hampton should be discharged, but sought the imposition of conditions.