Cash set aside from Arrow failure
Two firms owned by a Christchurch business family have won the right to have nearly $1 million ring-fenced in the fallout of the Arrow International (NZ) collapse.
The High Court in Christchurch has found that money paid by seven companies to construction company Arrow but meant for subcontractors, should be kept in trust for that purpose.
The total sum of $1.3m will be kept from going into the general creditors’ pool.
Arrow went into voluntary administration in February owing more than $40m to more than 700 unsecured and 85 secured creditors.
The case was brought by Arrow’s liquidators, BDO, who were seeking direction on how the money should be dealt with.
The ruling shows six of the companies had a contractual arrangement called a PMCM.
This meant they were directly liable to the trade contractors but had contracted Arrow to look after the payment process, for which it took a fee.
A seventh had a contract that was similar in nature and, until a month before Arrow’s collapse, the arrangements had been working well.
Three of the seven companies – NZ Ski, Harewood Investments and Papanui Properties – were represented in court.
Papanui Properties and Harewood Investments are owned by interests tied to Andrew and Murray Smith, who have developed the new Northlink retail centre in Papanui.
Associate Judge Dale Lester said that in his view it was not the intention that the money should become Arrow’s property.
‘‘There is no commercial sense in, as I have said, PMCM clients paying Arrow for the privilege of Arrow using their funds at their risk.’’
He ruled that all the money should be held in trust, except for retentions and Arrow’s fees.
NZ Ski had already paid its contractors so it should receive its $309,404 back.
Associate Judge Lester underlined that retentions signed after a new law in April 2017 should be held separately but those signed beforehand were lost to the general pool.
Harewood Investments was owed just over $25,400 and Papanui Properties was owed the biggest amount – $967,352. Both companies are owned by interests tied to the Smiths, who own several Mitre 10 stores.
Papanui Properties owns land in the old Firestone and later Sanitarium complex in Langdons Rd, which is now the Northlink shopping centre. K-Mart is due to open there early next year.
Arrow International’s failure shocked the industry because it had been trading for 30 years.
Its demise cost 200 staff their jobs and disrupted 17 to 20 construction projects.
Reasons given for its collapse included industry competition, a large loss-making project, and a $4.5m payment to March Construction.
BDO sought its liquidation in June, and a liquidators’ report said $3.3m had been recovered to pay secured creditor ANZ’s debts, employee entitlements, and postApril 2017 retentions.
Theoretically Arrow had about $40m in assets but a good portion was in shares of subsidiaries, and not recoverable, BDO said.
‘‘There is no commercial sense in, as I have said, PMCM clients paying Arrow for the privilege of Arrow using their funds at their risk.’’
Associate Judge Dale Lester