Vol 17 (2020) - Issue 5

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Robt. Jones Holdings Ltd v McCullagh [2019] NZSC 86, [2019] 1 NZLR 641: Diminution of the Asset Pool Available to Creditors not Required for Voidable Transactions under s 292 of the Companies Act 1993 (NZ)

Synopsis
The Supreme Court of New Zealand1 recently held that there is no requirement that an insolvent transaction must result in the diminution of a company's assets in order for the transaction to be voidable by a liquidator. The only requirements are those expressly set out in s 292 of the Companies Act 1993 ('1993 Act'). The Court considered the position under the various predecessors to the 1993 Act and the approaches of the courts of other jurisdictions with comparable provisions (including Australia, Canada and the United Kingdom). The Supreme Court approached the question on appeal as being fundamentally one of statutory interpretation, looking first to the text of s 292 then to the purpose of the provision and the voidable transaction regime. In upholding the decision of the Court of Appeal, the Supreme Court found that the text of s 292 left no room for a common law diminution requirement under previous enactments to survive, and supported this reasoning with an analysis of the broader policy objectives underlying the current legislative regime. The decision provides helpful clarity to insolvency practitioners and counsel as to what must be proven in order for a liquidator to succeed in setting aside an insolvent transaction (and, perhaps more importantly, what need not be proven).