Allied Concrete Ltd v Jeffrey Philip Meltzer and Lloyd James Hayward as Liquidators of Window Holdings Ltd ((in Liquidation))

JurisdictionNew Zealand
CourtSupreme Court
JudgeMcGrath,Glazebrook,Arnold JJ,Arnold J,Elias CJ,William Young J
Judgment Date18 February 2015
Neutral Citation[2015] NZSC 7
Docket NumberSC 51/2013 SC 81/2013
Date18 February 2015

[2015] NZSC 7



Elias CJ, McGrath, William Young, Glazebrook and Arnold JJ

SC 51/2013

SC 80/2013

SC 81/2013

Allied Concrete Limited
Jeffrey Philip Meltzer and Lloyd James Hayward as Liquidators of Window Holdings Limited (In Liquidation)
Fences & Kerbs Limited
Peter Esmond Farrell and Simon Paul Rogan as Liquidators of Contract Engineering Limited (In Liquidation)
Hiway Stabilizers New Zealand Limited
Jeffrey Philip Meltzer and Lloyd James Hayward as Liquidators of Window Holdings Limited (in Liquidation)

J V Ormsby, C L Webber and J-L Day for Appellant Allied Concrete Limited

B P Keene QC and J F Anderson for Respondents Meltzer and Hayward

J P Temm, S A Hickman and K A Badcock for Appellant Fences & Kerbs Limited

M D Branch and K I Bond for Respondents Farrell and Rogan D M Hughes and D I Durovich for Appellant Hiway Stabilizers New Zealand Limited

Appeals against a Court of Appeal decision that the term “gave value” under s296(3)(c) Companies Act 1993 (“CA”) (court must not order the recovery of property of a company where it gave value for the property) referred to new value given at the time of the impugned payment and that value given earlier when the debt was created was not sufficient — the Court of Appeal set aside payments the appellant companies had received from insolvent companies within two years of the latter companies going into liquidation — the payments were on account of goods or services previously supplied by the appellant companies — whether “value” under s296(3)(c) CA meant new value given at, or after, the time payment was received from the debtor company or whether it also encompassed the original value given by the creditor when the goods or services were supplied.

Held (per majority): Under s296(3)(c) CA, the recipient of (in these appeals) a payment from the debtor company had to establish that, when it received the payment, it gave value for the payment or altered its position in the reasonably held belief that the payment was valid and would not be set aside. The Court of Appeal considered that the use of the word “when” indicated that a temporal restriction was intended, so that the recipient had to give value at the time the payment was made. One obvious problem with this approach was that it could not apply in respect of the second alternative in s296(3)(c) CA – alteration of position – because an alteration was unlikely to occur contemporaneously with the receipt of the payment.

The Court of Appeal's acknowledgment that the temporal requirement which it saw in the language of s296(3) CA could not be taken literally, raised some doubt about the validity of its conclusion that the subsection imposed such a requirement. The use of the word “when” certainly indicated that there had to be a linkage or connection between the impugned payment and the elements of s296(3), but it was doubtful that it could be taken further than that. It was not the use of the word “when” but rather the use of the words “gave value” that was significant in temporal terms. There was no reason why, as a matter of interpretation, “gave value” could not be taken to encompass the notion of having given value earlier.

There were differences between the Australian and the New Zealand provisions, but that did not assist in the resolution of the particular issue in this case. What was important was that the legislative history indicated that a policy decision was made to align New Zealand's position with that of Australia. The language used was not inconsistent with that policy decision.

Looking at the context of the provision, the words “gave value” in s296(3) CA had to refer to something other than further goods or services provided by the creditor at the time of the disputed payment because the payment for the new value would not be a voidable transaction. Given that, the Court of Appeal's interpretation of “gave value” meant that the words would have very limited application; they would be confined to situations where the new value was provided on credit or was intangible.

The boundary drawn by the Court of Appeal decisions left limited room for the operation of the s296(3) CA defence, particularly when viewed against the background of the replacement of the “ordinary course of business” test by the “continuing business relationship” test. As the Court of Appeal interpreted it, s296(3) had a narrower scope of operation than the provisions it replaced, if only because a supplier which had a one-off credit-based transaction with a technically insolvent company was unlikely to be able to take the benefit of the defence where the company paid in accordance with the supply arrangement. In a routine transaction of that type, the supplier would give nothing additional by way of value when it received the payment. It was difficult to see why a supplier under a “one-off” credit-based transaction of a type commonly entered into should be precluded from qualifying for the defence where the debtor company paid in accordance with the terms of supply, particularly where the supplier was not familiar with the debtor company. In the case of suppliers with a longer term relationship with the debtor company, their ability to utilise the defence might depend on subtle variations in factual circumstances, in particular, whether they did or said something which could be interpreted as giving additional value at the time of payment.

The Court of Appeal's interpretation of s296(3) CA did not advance the objective of providing creditors with more certainty that the transactions they entered into would not be made void but, rather, undermined it. It was implausible that Parliament intended that type of outcome. Section 296(3) CA had to be interpreted consistently with the Australian provision, which was consistent with the approach that was taken historically in relation to the “valuable consideration” requirement in the bankruptcy legislation. On that approach, “value” under s296(3) CA, while it must be real and substantial, could include value given when the debt was initially incurred or value arising from by the reduction or extinguishment of a liability to the creditor incurred by the debtor company as a result of an earlier transaction. In that context, it had to be remembered that before a creditor could take advantage of the s296(3) CA defence, it had to show that it acted in good faith and there were no reasonable grounds for a creditor in its position to believe that the company was technically insolvent.

The legislative history of the Companies Amendment Act 2006, which enacted the s296(3) CA defence, made clear that Parliament had intended to follow the equivalent Australian legislation and case law, where the requirement for “value” was satisfied if the creditor gave value creating the antecedent debt. The language used in s296 CA, assessed in light of the legislation's purpose as revealed in the legislative history, did not demonstrate any intention to severely curtail the circumstances in which creditors could claim relief from the voidable transaction provisions. The intention was to reduce the scope for exceptions under s292 CA by removing the “ordinary course of business” test and replacing it with the “continuing business relationship” test and to place greater emphasis on s296(3) CA for the purposes of a defence to a liquidator's claim. The intention was to create greater certainty for creditors and to align the New Zealand position with that in Australia. To give effect to that intention, it was necessary to adopt a wider meaning of s296(3)(c) CA than that adopted by the Court of Appeal, which left the s296(3) CA defence with little scope for operation.

Appeals allowed.


A The appeals are allowed.

B The applications of the liquidators for the transactions to be voided are dismissed.

C The respondents in each appeal must pay costs of $10,000 to the appellant in the relevant appeal, plus the appellant's reasonable disbursements.

D Absent agreement between the parties, costs in the High Court and Court of Appeal are to be fixed by those Courts in light of this judgment.


Para No

McGrath, Glazebrook and Arnold JJ


Elias CJ


William Young J


McGrath, Glazebrook AND Arnold JJ

(Given by Arnold J)

Para No





Allied Concrete


Fences & Kerbs


Hiway Stabilizers


High Court decisions


The statutory provisions


Legislative background


The 1993 reforms


The 2006 reforms




Statutory language


(i) Text of s 296(3)


(ii) Comparison with the Australian provision


Interpretation of “gave value”


(i) Historical perspective


(ii) “Gave value” in context


(iii) Underlying policy





These appeals involve a short but important point about the operation of the voidable transaction provisions in the Companies Act 1993 (the Act). The provisions engage two important but potentially conflicting policies. 1

  • (a) On the one hand, a key purpose of the voidable transaction regime is to protect an insolvent company's creditors as a whole against a diminution of the assets available to them resulting from a transaction which confers an inappropriate advantage on one creditor by allowing that creditor to recover more than it would in a liquidation. The pari passu principle requires equal treatment of creditors in like positions (in these appeals, unsecured creditors) and facilitates the orderly and efficient realisation of the company's assets for...

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