09 352 2040
021 632 066

bret@gustafson.co.nz

Insolvency

Introduction

 

A large part of my experience involves being the principal legal adviser for administrators, liquidators and receivers  of insolvent companies and other trading entities. This involves some litigation but also significant on the ground advice relating to the conduct of the insolvency: what are the secured creditors rights; who is entitled to assets when there are competing claims; should contractual obligations of a company be honoured or allowed to breach; when will set off apply?

 

There are also the more long term questions relating to preferences, voidable securities and potential breaches of directors' duties.

 

When I started practice I was obviously a junior solicitor but I learned and gained my initial experience on some of the largest and most complex insolvencies of the 1980 and early 1990s:

 

Equiticorp Group (statutory management)

Leyland Investments Ltd (Receivership)

Shoreville Mandalay Ltd (Receivership)

Goldcorp Exchange Ltd (Receivership)

Tisco Services Ltd (Liquidation)

Levene Ltd (Receivership)

Nautilus Developments Ltd (Liquidation).

 

As I progressed and developed experience I became the principal adviser to insolvency practitioners administering the following well known and complex insolvencies:

 

Access Brokerage Ltd (Liquidation) 

Receivables Management Group Pty Ltd (In Administration)

Saeco Coffee Machines New Zealand Ltd

ICP Bio Limited (Receivership)
Food First Limited (Receivership)

Hurlstone Group

 

I have also represented creditors, including secured creditors, in disputes with administrators, receivers and liquidators of the following companies:

 

Crafar Farms Group

Capehorn Group

HIH Insurance Group

HMV Group

Hartner Group Limited

Service Foods Manawatu Limited.

New Zealand Dymock's franchises.

  

To advise in these disputes I have concentrated on building knowledge and expertise relating to priority issues and the duties and rights of a secured creditor, receiver, administrator and liquidator.

 

I have also specialised in advising and representing parties in claims involving the Personal Property Securities Act. This legislation is based on the Canadian PPSA legislation and the Uniform Commercial Code of the United States. I subscribe to the lexis databases for these jurisdictions and am very experienced in using the same. This asset and experience allows me access to many cases and articles on the area that opposing lawyers often do not have. This gives my clients a real advantage in assessing and advancing their cases.

Some cases I have appeared in involving insolvency issues

Dymocks Franchises Systems (NSW) v Todd (No2) 1 NZLR 145
In May of 2004 I appeared as  senior counsel in the Privy Council and was able to obtain judgment against the third party funder of an insolvent party who had brought unsuccessful legal proceedings. This is currently the leading case on this topic in New Zealand and the United Kingdom.
 

Simpson v New Zealand Associated Refrigerated Food Distributors Ltd Reported: Court of Appeal [2007] 2 NZLR 130.

 

This is one of the leading cases on the Personal Property Securities Act  1999.

In this case I acted for NZARFD on the Receivers unsuccessful application to have the decision of the High Court reversed.

The Court of Appeal unanimously held that the  arrangement between parties was a security interest and that an arguably over-broad description in a financing statement  could not be a significant error invalidating perfection of security interest.

 

The case has been the subject of analysis in the following legal publications:

 Capital Letter 30 2/6;

 Butterworths Company Law [2007] 225;

 NZ Law Journal [2007] 231;

 NZ Law Review [2007] 380;

NZ Law Review [2007] 382; 

14 NZ Business Law Quarterly (2008)  109;

 NZ Law Journal [2010] 393

 

Petterson v Gothard (No4) [2012] NZHC 1378 

Determination by Heath J regarding costs;The Liquidator of Hurlstone Earthmoving Ltd in proceedings the  receivers; There had been 3 Part 19 applications bought by the Liquidator giving  rise to  cross applications by the Receivers for directions concerning proper application of ss 30 and 37 Receiverships Act 1993 The liquidator was  largely successful at the hearings of these applications. Heath J held the Liquidator entitled to costs on interlocutory application under s 37 RA on 2B basis with leave reserved to apply for increased costs at later stage. 

 

Petterson v Gothard (No3) [2012] NZHC 666

This case established how section 261 Notices can be served by a liquidator and what a receiver must do when he or she receives such a notice from a Liquidator.

 

Eagle v Petterson CIV 2011-404- 7387, 16 December 2011, HeathJ

The question for determination was what amounts could a Receiver legitimately deduct from the proceeds of accounts receivable and inventory before remitting the proceeds to the preferential creditors. Acting for David Petterson, the liquidator of a group of companies known as the Hurlstone Group we were able successfully reduce the categories of costs the Receivers wished to deduct from these proceed.

 

Re Nylex (New Zealand) Ltd CIV-2009-404-1217)11 March 2009, Heath J 

 

Successful application by administrators of NNZL and Nylex Engineering Systems Ltd (‘NESL’) under s 239ATCompanies Act 1993 (CA) for order extending convening period for ‘watershed meeting’; NNZL and NESL placed in voluntary administration; requirement under CA that watershed meeting be convened within 20 days of appointing Administrator; Administrators applied to extend convening period

 

Gibson & Stiassny v Stockco Limited (CIV 2010- 404 - 7120 17 December 2010, White J)

This case concerned an application for directions by the Receivers of the Crafar Farm group of Companies and a dispute as to the priority claims of two secured creditors. The case ran for 2.5 weeks and involved over 16 witnesses who gave evidence as to what was a sale of livestock in the ordinary course of the crafar farm group business. The case also involved detailed submission and a decision on how to deal with a mixing of  goods that  prevented identification of the actual goods (in this case cows) subject to a secured creditor’s claim.

 

Stockco Ltd v Walker (2011) 9 NZBLC 103,243

Case concerning priority between a common law or contractual lien over livestock until paid and a registered interest and a secured lender arising from the Capehorn Farms Limited Receivership.

 

 

StockCo v Tawhiti- Ariki Limited, (CIV2009-404-3413, 9 June 2010, Harrison J)

 

My Client sought and obtained interim freezing orders to prevent distribution of assets that my client had a perfected security interest in. The defendants were third parties that had entered into agreements with my client’s debtor arising from the Capehorn Farms Limited receivership. Interim possession of the stock subsequently sold by the third parties. Orders were also obtained as to disclosure of details of the defendants assets and recent payments from accounts of three different financial institutions.  

Vision Securities Ltd v Capital + Merchant Finance Ltd (in Rec) [2010] NZCCLR 21 (HC)

 interpretation of security sharing agreement and receivers’ liability  involving an insolvent proerty development company.

Crowley v International Casualty & Surety Company Ltd M1371-IM/00, 4 December 2001Morris J

Successful application for Court order regarding funds following insolvency; ICSCL insolvent insurance company; ICSCL entitled $500,000 Government stock formerly held by Public Trustee; D appointed liquidator; D sought order that insurance bond become fund in general pool of ICSCL's assets; C sought to be paid from fund on ground that C's policy granted and entered into in New Zealand; CIDR claimed proprietary claim as result of estoppel arrangement

Capital Equipment Finance Ltd v Dominion Finance Group Ltd 3/12/02, CA36/02- Court of Appeal case concerning release of security obtained through non disclosure.\

Hartner Construction Ltd (in rec) v Alotech Walls and Ceilings Ltd (in liq & in rec) M630-IMOO 15 February 2001, Hansen J

The successful winding up of the Hartner Group by a contingent creditor 

 

Capital Equipment Finance Ltd v Dominion Finance Group Ltd 16/4/02, Salmon J, HC Auckland CP349-SD/00 

A two week trial involving priority dispute between two debenture holders and the receiver  about priority over an aircraft owned by the company in receivership

Agio Trustees Company Ltd v Harts Contributory Mortgages Nominee Company Ltd two week trial involving an insolvent company and  alleged breach of the secured creditor's duties in realising the Company's assets. I acted for the successful secured creditor.

 

WESTPAC SECURITIES LTD v KENSINGTON [1994] 2 NZLR 555 

Unsuccessful appeal by Westpac against HC decision which found SIL estopped from denying property was pledged to BNZ. I acted for the Liquidator of the Company who had distributed the proceeds in accordance with the High Court direction to the BNZ and who supported the BNZ's position.

 

Nautilus Developments Limited [2000] 2 NZLR 505

I acted successfully for the Liquidator who obtained approval to have a third party fund litigation against the directors of the liquidated company in return for a share of any recovery by the company in liquidation.

Pasadena Holdings Limited M1039/98, 30 April 1999 Alt Reece v Montgomerie

Application by solicitor Reece pursuant to s294 Companies Act 1993 for an order that payment to him for legal fees and disbursements from Pasadena not be set aside; The  liquidator (my client) has set aside the payments totalling $135,167 as voidable transactions under s292 liquidator entitled to recover $69,426. 

Cited in  Laws NZ Companies paras 431-440.

Meltzer v Origo (The Source) Ltd, M1015/977, 1 December 1998, Potter J
I successfully acted for the Liquidator opposing an application to set aside the Liquidator's voidable transaction notice

 

GO DIRECT MARKETING LTD v PASADENA HOLDINGS LTD (in liquidation) (1998) 8 NZCLC 261,795

 A  case concerning an application to set aside a voidable transaction notice