McIntosh v Fisk and Anor

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeHarrison,French JJ,Harrison J,Miller J
Judgment Date16 March 2016
Neutral Citation[2015] NZCA 74
Date16 March 2016
Docket NumberCA384/2015

[2015] NZCA 74



Harrison, French and Miller JJ


Hamish McIntosh
John Howard Ross Fisk and David John Bridgman

J B M Smith QC and J L W Wass for Appellant

M G Colson and R Pinny for Respondent and Cross-Appellant

Appeal against a High Court (“HC”) decision which held the appellant was not entitled to retain the profit component of an investment — cross-appeal by the respondent liquidators against the finding that the appellant's original deposit of funds satisfied the requirement of giving value or valuable consideration — the appellant had deposited funds into an investment company, however the company operated a Ponzi scheme — a year before its liquidation, the company repaid the appellant's deposit of $500,000 plus fictitious profits of $454,047 ($954,047 in total) — on the liquidators' application to recover the payment, the HC found that the appellant had given value for and was entitled to retain his original deposit but he was ordered to repay the profit because he had neither given value nor altered his financial position in the reasonably held belief that this element of the payment was valid — whether the appellant could establish either that he had given value or acquired for valuable consideration all or part of the payment; or, if not, whether he had altered his position in the reasonably held belief that the transfer was valid and would not be set aside.

Held: Under s292 Companies Act 1993 (“CA”) (insolvent transaction voidable) and s349 Property Law Act 2007 (“PLA”) (protection of persons receiving property under disposition), the liquidator of a failed company was entitled to recover payments made by the company to a creditor within the two years before liquidation, unless the creditor could prove that they had given value or valuable consideration.

When RAM had misappropriated the money for its own purposes, M had acquired a right of action for breach of trust against RAM and an equitable debt was created in M's favour for the amount of the deposit together with equitable damages, being the amount necessary to restore M to the position in which he would have been but for RAM's misappropriation. RAM had taken value of $500,000 when misappropriating M's deposit and treating the money as its own. It did not matter whether the antecedent debt or discharge tests were applied. A debt was created when the deposit was misappropriated and payment was later accepted in settlement. The time lag between the two was immaterial. On the antecedent debt hypothesis, the focus was on the time when M had given value or valuable consideration and RAM acquired legal title to the deposit: M's beneficial entitlement to the monies was relevant only to his right of action for equitable damages for breach of trust. On the discharge hypothesis, RAM's payment settled the first and readily quantifiable element of its obligation. It was immaterial that in doing so, RAM had incurred a matching liability to another depositor.

The consideration given by M for the deposit element of the payment received from RAM did not raise any question of adequacy of value. The liquidators claim to recover $500,000 of RAM's payment to M failed. The payment of $954,047 had not discharged RAM's antecedent obligation to M. There was no accord or satisfaction at that stage of M's claim. It was artificial, and contrary to the purpose of the voidable preference provisions, to ignore the notional nature of the $454,047 component.

The liquidators were entitled to recover the $454,047 profit from M for the reasons that: payment of that amount was not made in discharge of RAM's liability to M in equitable damages but according to a notional calculation based upon a fabricated foundation of non-existent securities; M had not given value for payment of that amount; and M could not retain money to which he had no legal entitlement or by that means had enriched himself at the expense of other creditors.

M's decision to buy a property had not consciously been made in reliance on RAM's payment. His interest in buying the property was longstanding and well preceded his notice of withdrawal and receipt of the deposit.

The appeal and cross-appeal were dismissed.

  • A The appeal is dismissed.

  • B The cross-appeal is dismissed. C There is no order as to costs.


Harrison and French JJ


Miller J (dissenting on cross-appeal)


Harrison AND French JJ

(Given by Harrison J)

Table of Contents

Para No





Statutory defences


First defence: giving value or valuable consideration


(a) High Court


(b) Principles


(i) Legal relationship


(ii) Antecedent debt or obligation and discharge tests


(c) Payment


(i) Deposit


(ii) Balance


(d) Comparative jurisprudence


Second defence: alteration of position


(a) Legal principles


(b) Mr McIntosh's financial circumstances


(c) Decision


(i) Purchase of 33 Palliser Road


(ii) Lost opportunity





Subject to proving certain preconditions, the liquidator of a failed company is entitled to recover any payments made by the company to a creditor within the two year period before liquidation unless the creditor can prove that either he or she (1) gave value or valuable consideration for the payment or (2) has altered his or her position in the reasonably held belief that the payment was valid. 1 While these alternative defences are simply expressed, the application of the first to the facts at issue on this appeal and cross-appeal is not without its conceptual difficulties, and our decision on it will directly affect the rights and obligations of the company and many of its creditors.


Ross Asset Management Ltd (RAM) managed funds deposited for investment by members of the general public. The company was the corporate ego of

David Ross, a Wellington accountant. It appeared to be most successful, reporting substantial profits on investments in nominated securities. But the truth was otherwise.

Mr Ross operated an elaborate fraud, known colloquially as a Ponzi scheme. The reported securities were largely non-existent. He used new investments to repay maturing deposits, including a substantial but fictitious profit component. When it was placed in liquidation RAM's liabilities exceeded its assets by at least $100 million. The company was, and had been for many years, hopelessly insolvent.


Hamish McIntosh was a depositor. Some four years after his original deposit, and about a year before its liquidation, RAM repaid Mr McIntosh's deposit of $500,000 plus fictitious profits of $454,047, a total of $954,047. On the liquidators' application to recover the payment MacKenzie J found that Mr McIntosh had given value for and was entitled to retain $500,000 of it. 2 But he was ordered to repay the balance of $454,047 because he had neither given value nor altered his financial position in the reasonably held belief that this element of the payment was valid. In legal terms, this part constituted a voidable transaction 3 or a prejudicial disposition. 4


Mr McIntosh appeals; the liquidators cross-appeal.


The relevant facts are not in dispute and for these purposes can be stated shortly.


Mr McIntosh met Mr Ross in March 2007. He agreed to deposit $500,000 with RAM to establish and manage what he called an international equity portfolio. He had borrowed the $500,000 from Westpac which he paid to RAM in April 2007. He described his goal as to achieve consistent medium to long-term capital growth from a diversified share portfolio.


The legal relationship between the parties was governed by a contract whereby Mr McIntosh appointed RAM as his agent for the purpose of managing and administering his portfolio. The company was to hold the funds upon a bare trust for Mr McIntosh. Another company, Dagger Nominees Ltd, was appointed to hold any assets comprised in the portfolio or managed by RAM. The agreement was terminable on 30 working days' notice. RAM undertook to discharge its duties in a proper manner. Management fees were payable. A limitation of liability to a figure three times a year's fees did not apply to fraud.


Mr McIntosh's deposit suffered the same fate of misappropriation as Mr Ross practised on all other depositors. MacKenzie J described Mr Ross' modus operandi more fully as follows:

[9] Mr Ross did not operate his business in accordance with that contract. Cash or shares transferred by investors for investment under the agreement were not immediately transferred to Dagger and held on trust for the individual investors. They became part of a pool of shares and cash held by Ross group companies: RAM, Dagger, Bevis Marks Corporation Ltd, and United Asset Management Ltd. RAM paid from that pool the operating expenses of RAM, personal drawings of Mr Ross, payments to investors, and payment for the few share purchases which were actually made. Funds obtained from investor deposits were used first to meet any Ross Group expenditure or withdrawals sought by other investors. If there was insufficient cash available to meet those requirements, shares were sold.

[10] Mr Ross reported to the investor clients in terms which indicated to them that investments had been made in shares and other securities in accordance with the management agreement. The reports listed individual shareholdings of specific securities, at prices and returns which matched what was occurring in the market for the particular security. An investor who compared his portfolio statement to stock exchange reports would not have seen any price discrepancy. The fictitious...

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  • Voidable transactions and Ponzi schemes – the Supreme Court ruling
    • New Zealand
    • Mondaq New Zealand
    • 10 July 2017
    ...Insolvency Working Group regarding the voidable transactions regime and Ponzi schemes can be accessed here. Footnotes 1 McIntosh v Fisk [2015] NZCA 74. 2 Allied Concrete Ltd v Meltzer [2015] NZSC 7. 3 Cunningham v Brown 265 US 1 (1924) at 8. 4McIntosh v Fisk [2017] NZSC 78 at [270] per Glaz......

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