Lift bar for liquidators, lawyers urge
Call follows High Court finding
One of New Zealand’s largest law firms says liquidators need to be regulated after one was found by a judge to have fabricated a document. “There is no ‘fit and proper person’ test for liquidators,” said law firm Chapman Tripp.
“No training, qualification, registration or licensing is required. New Zealand is unusual in that regard. It is a situation that ought to change,” the firm said.
These comments came after Te Kawhata liquidator Geoff Martin Smith was found by a High Court judge to have fabricated a document.
In November 2013, Smith was appointed as liquidator of two companies that sold goods out of trucks, typically in low-income areas.
The following year, Andrew McKay was called in as receiver by Westpac and a dispute emerged about his appointment.
McKay sought High Court declarations that he was validly appointed, entitled to possession of the companies’ assets and, if so, whether he was allowed compensation from Smith for dealing with these.
McKay eventually sought just over $540,000 from Smith, who this year was barred from defending the claim after he failed to pay a costs order.
Smith had earlier claimed he had given a notice to Westpac in December 2013 asking which rights the bank wanted to exercise over the companies’ assets. He claimed Westpac, by not responding, had abandoned its security over the assets.
But McKay believed this notice was sent much later than Smith claimed. Smith had convictions for tax evasion, theft, fraud and falsifying documents, McKay told the court.
McKay said the photographs Smith used to prove the notice was delivered in 2013 showed an envelope with a commemorative stamp issued by NZ Post in October last year.
Justice Matthew Muir, in a judgment delivered this week, said he was satisfied the notice was fabricated.
The judge also accepted that between Smith’s and McKay’s appointments, t he l i quidator disbursed $852,998 from the companies’ accounts.
This money was subject to Westpac’s security and McKay could not ascertain how $540,000 of the funds were applied.
Muir ordered Smith to pay McKay just over $540,000 plus interest.
Restructuring Insolvency & Turnaround Association of New Zealand chairman Brendon Gibson agreed that the judgment illustrated the need for regulation of the industry.
“The problem we’ve got at the moment is that it wasn’t illegal him [Smith] taking the appointment as liquidator . . . because the bar’s so low,” Gibson said.
The Government is currently reviewing whether New Zealand’s insolvency regime is fit for purpose.
Smith did not return a message yesterday.