When the Government appointed Messrs Hunn, Bond & Kernohan to enquire into the causes of the leaky building syndrome in 2002 (they were called “The Overview Group on Weathertightness”) they took it upon themselves to investigate and report on all the failings of the construction industry in New Zealand. In their otherwise excellent report (issued in two parts on 31 August & 31 October 2002) they offered the following comments:
“it is understood that [the Companies Act] offers little … protection to a home-builder/buyer consumer in the event of the vendor company … being put into voluntary liquidation by the directors”
“there is currently nothing to stop the unscrupulous … builder from liquidating their company … to avoid claims and action from dissatisfied purchasers”
You may be aware that under that law, you can be made to hand back the money that your customer has paid you, any time in the last two years, if he goes bust
You may have heard of the law called "voidable transactions". You may be aware that under that law, you can be made to hand back the money that your customer has paid you, any time in the last two years, if he goes bust. And you may be aware that our Supreme Court has recently issued a ruling that has radically changed the law. This newsletter tells you what it’s all about.
It is a common practice in the construction industry for a portion of the progress payments due to contractors and subcontractors to be withheld well beyond the date when they would normally be payable.
These amounts are known as retentions. Typically 5-10% of each progress payment is withheld, and eventually the accumulated amount is released in two installments – 50% on practical completion, and the other 50% on satisfactory completion of the residual work that was notified during the defects liability period.
As lawyers, we are all familiar with the personal property securities regime that has been a feature of the legal landscape since the Personal Property Securities Act 1999 came into force.
Unfortunately that familiarity is not as widespread throughout the commercial sector. Financiers and traders that habitually sell valuable items on credit are well versed in the proper procedures to follow under the legislation, even if they might not fully understand the rationale. Those that are not as well versed, are the people who very rarely have cause to rely on the PPSA, and as a result they can occasionally be caught out badly.
There are various ways in which a debtor can get relief from creditors under New Zealand law.
Click "Read More" for the five principal methods.
There are various ways in which you can get relief from your creditors under New Zealand law.
The five main methods are:
- Summary instalment order
- No asset procedure
It happened when Levenes and Palmers Garden Centres went into receivership several years ago.
And it happened again when Whitcoulls and Borders were recently put into administration. People holding unredeemed gift tokens or vouchers (including my 11 year old daughter) were told that they would not be redeemed for their face value. The best they could do was buy a product for at least twice the face value of the token, and get a discount equivalent to that face value, with the rest of the price payable in cash. How is it that retailers can get away with this? What is the relevant law?
Trusts have been with us for a long time.
Back in the Crusades, Knights used to transfer their assets to a reliable friend or relative before they departed for the Holy Land, on the condition that he would only use those assets for the benefit of the Knight’s family members. That is the true concept of a trust – where someone appears to be the owner of some assets, but in fact he only holds them as a guardian for someone else.
We have many different forms of tax, as you know. They include taxes based on our income (income tax), our purchases (GST), our risk of injury (ACC), and any gifts that we make above a certain level (gift duty).
We used to have another tax known as “estate duty”, which was based on the value of the assets you owned when you died, but that was abolished in 1992. Before estate duty was abolished, people used to give away their assets to their loved ones immediately before they died, for the sole purpose of avoiding the tax. To stop people avoiding estate duty in this way, gift duty was introduced, so people were caught either way.
When you sell goods and services on credit, you run a risk, and that risk is that your customer won’t pay you.
That could be because they don’t like the quality or standard of the goods or services you have supplied, or it could be because they are short of money. If they are short of money, chances are that there are a lot of other suppliers who haven’t been paid as well. In that case there is going to be a contest between you and the other creditors as to who gets paid first. And that will come down to who is the most resourceful when it comes to putting pressure on the debtor.