In our legal update on insolvency law issued in July 2010 we commented on the High Court decision of McKay v Toll Logistics (NZ) Limited. 

A recent UK High Court decision on the issue of balance sheet insolvency will be of interest in New Zealand, despite the fact that the respective statutory solvency tests differ.  

The Supreme Court of NSW in Citadel Financial Corporation Pty Ltd [2020] NSWSC 886 has made orders (in accordance with section 447A(2(b) of the Corporations Act 2001 (Cth)) to terminate a deed of company arrangement (DOCA) on grounds that entry into such DOCA was an abuse of the voluntary administration process.

The English High Court ruled that prospective emergency legislation to amend insolvency laws due to the COVID-19 pandemic could not prevent liquidation proceedings from being brought.  In Shorts Gardens LLP v London Borough of Camden Council [2020] EWHC 1001 (Ch) applications were made by two companies to restrain local councils from bringing liquidation proceedings in respect of unpaid rates and costs orders.

The Ministry of Business, Innovation and Employment has published a Cabinet Paper outlining proposed reforms to New Zealand's insolvency laws to take account of certain recommendations made in the second report of the Insolvency Working Group from May 2017.

A recent decision from the High Court in the Walker v Forbes litigation also reaffirms the Court’s protection of a defendant’s personal financial information. The plaintiff, Mr Walker, the liquidator of Property Ventures Ltd, sought discovery of the insurance policy of one of the defendants, Mr Hansen, in an attempt to determine the amount of insurance cover that Mr Hansen might have to meet the liquidator's claim against him.

The director and shareholders of Rayland Investment Ltd (in liq) (the Company) applied to terminate the Company's liquidation. The Court found it appropriate to make that order. At issue, however, was the remuneration claimed by Mr Norrie, the Company's liquidator, which the Court reduced from $39,128 to $15,559.

Mr Norrie was not entitled to remuneration for unnecessary preliminary steps such as consenting to appointment by affidavit and carrying out property searches.

Commercial Factors Ltd v Meltzer concerned a funding agreement between Commercial Factors Ltd (CFL) and the liquidators of Blue Chip New Zealand Ltd (in liq) (Company) by which CFL agreed to lend $67,750 to allow the liquidators to obtain an opinion on the merits of claims against the Company's directors.

If proceedings were commenced, the Company was to pay 2.5% of any proceeds received to CFL.  If the Company did not commence proceedings but otherwise received funds, the agreement stipulated CFL's right to repayment after any liquidator costs.

In Day v The Official Assignee as Liquidator of GN Networks Ltd (in Liq) [2016] NZHC 2400, the High Court rejected a claim that the funding arrangement at issue constituted maintenance or champerty.

The Court of Appeal in Madsen-Ries v Petera considered the reasonableness of directors' remuneration in circumstances when a company is in a dire financial position.  Mr and Mrs Petera, directors of a failed transport business, were asked by the liquidators to repay the salaries they declared for tax purposes, because they had not complied with the certification requirements under section 161 of the Companies Act 1993 (Act), being to satisfy themselves on reasonable grounds that the payments were fair to the company.