Book Review for Guide to Company Liquidation by Liesle Theron

Tuesday April 29, 2014

Book Review for Guide to Company Liquidation by Liesle Theron


Holland Beckett Lawyers Allen Hunter and Ben Eagleson review a new guide to company liquidation for the NZ Law Journal. Liesle Theron says in the preface to Guide to Company Liquidation:

"The recent activity in the area of company liquidation has provided a good opportunity for a comprehensive up to date New Zealand commentary.  I hope that it will provide a helpful tool of quick and easy reference for all those that work in the area and at least a starting point for more in-depth research on particular topics."

This is a fair summary of the book, with its easy to follow contents page broken down by the steps of liquidation, starting with statutory demands through to the liquidation proceeding, consequences of liquidation and liquidator's powers and duties.

The guide makes regular references to further relevant material that can be found in Morrison's Company Law, Heath & Whale on Insolvency and where relevant the applicable High Court Rules.

The strength of Theron's guide for any insolvency practitioner is that rather than blandly re-telling the statutory provisions, the author has gone beyond to comprehensively draw together a statement of the applicable case law and statutory framework as at the date of publishing, providing any reader with a single place to go for most of their liquidation case needs

Where relevant, Theron has also commented on and included reference to other jurisdictions' case law and equivalent statutes.  Praise must be given for Theron going beyond the NZ case law where it has not provided sufficient authority on a particular point and searching out cases on point from analogous  jurisdictions.  The guide's discussion on the ability to set off in liquidation (section 310 Companies Act 1993), the policy reasons for setting-off and the requirement of mutuality in chapter 7 are good examples of this drawing together of overseas authority where NZ's legal tapestry is a bit frayed.

Of practical use will be  chapter 2 on the ability to appoint an interim liquidator this being an infrequently utilised provision ideally suited to those situations where assets are at risk of dissipation from the insolvent company before the substantive liquidation application can be heard by the High Court.

Further, in particular, chapter 5 on Liquidation of Other Entities (i.e. non-company) deals with diverse other situations very clearly.  Considerable credit must be given to Theron for the inclusion of this chapter which covers the liquidation of other entities such as incorporated societies and body corporates under the Unit Titles Act.  Also, the commentary on the election process of a secured creditor under section 305 of the Companies Act 1993 is both practical and concise- potentially a valuable reference resource given that this is an area that in the past has often been misapplied by secured creditors.

Just over half of Theron's guide is dedicated to the effect and consequences of liquidation, which is where many of the more contentious legal issues lie, making this guide useful for those practitioners who are dealing with a company already in liquidation rather than just those who require a "how to" liquidate text.  Chapter 10 on the rights duties and powers of liquidators is the longest in the guide yet remains a comprehensive summary of case and statutory law is logically set out and easy to use without being verbose.

However, one topic almost unvisited is the "running account" area of s.292(4B) Companies Act 1993, particularly the controversial ability of a liquidator to "cherry pick" the most advantageous dates for the commencement of the 'running' of the trading account.  Also, a chapter on PPSR financing statements, liens and other securities and their interplay with liquidation and a summary of priorities of the same would have been valuable.

The book also covers some recent case law in this area, which has of recent times been rich in developments.  However, due no doubt to the timing of finalising the text, a number of important recent cases have not been included for example, CIR v Jennings Roadfreight Ltd (In Liq) [2013] NZCA 455 where the Court of Appeal interpreted s167(1) of the Tax Administration Act 1994 to provide that where PAYE has not been paid all monies in the company's accounts as at liquidation was held on trust for IRD up to the value of the outstanding PAYE obligations.  Also conspicuous in its absence is the Court of Appeal's ruling on Peter Esmond Farrell and Simon Paul Rogan as Liquidators of Contract Engineering Ltd (In Receivership and In Liquidation) v Fences and Kerbs Ltd [2013] NZCA 329, regarding the giving of value under s296(3)(c) of the Companies Act 1993.  Fences and Kerbs helpfully summarises the relevant New Zealand case law on this particular point and then goes on to summarise and comment on the equivalent Australian position and where the two jurisdictions have diverged.  It is understood that both Fences and Kerbs Ltd and Jennings Roadfreight Ltd have been appealed to the Supreme Court and both those ultimate decisions are no doubt awaited by insolvency practitioners throughout the country.

As another general comment, this guide does make a good effort to link the statutory and case law context with the relevant High Court procedural rules.  However, it does not go that one step further and outline the documents required to bring the various applications and proceedings commented on.

However, ultimately a legal text cannot be all things to all people without being a voluminous text.  This is something which this guide does not purport to be and if it did it would lose its ease of reference.

Overall, for most practitioners other than liquidation specialists, this is an excellent "go to" handbook of first resort.  It will quickly point to authority and principle in an area of practice where time is often at a premium.

This book review was published in the April 2014 New Zealand Law Journal.  

 

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