Meltzer v Allied Concrete Limited [2013] NZHC 977 (6 May 2013)

BETWEEN JEFFREY PHILIP MELTZER AND LLOYD JAMES HAYWARD AS LIQUIDATORS OF WINDOW HOLDINGS LIMITED (IN LIQUIDATION)

This judgment was delivered by me on 6 May 2013 at 4pm, pursuant to Rule 11.5 of the High Court Rules.

R B Hucker/D Lang Siu, Hucker & Associates, PO Box 3843, Shortland Street, Auckland

JEFFREY PHILIP MELTZER AND LLOYD JAMES HAYWARD AS LIQUIDATORS OF WINDOW HOLDINGS LIMITED (IN LIQUIDATION) V ALLIED CONCRETE LIMITED HC AK CIV 2012-404-003170 [6 May 2013]

[1] Window Holdings Limited was put into liquidation on 26 May 2011. As it was named Harker Underground Construction Limited at time of the transaction in issue in this proceeding, I will refer to it as Harker.

[2] Until it was put into liquidation, Harker purchased concrete products from Allied Concrete Limited (Allied) over several years. It purchased these products on credit: initially on a standard (one month basis), but over the course of the relationship Allied agreed orally to an extended period.

2010 to be a voidable transaction. Allied gave a notice of objection. The liquidators brought the present application for a determination that the contested amount was a voidable transaction and for an order that Allied pay that sum to them to distribute in the liquidation.

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[4] There is no dispute that the payment was made on 21 October 2010, or that the transaction is within the two year period prior to liquidation within which an insolvent transaction can be voidable.1

[5] The liquidators accept that Harker and Allied had a continuing business relationship in terms of s 292(4B) of the Companies Act 1993 (the Act), conducted through a running account. They also accept that Allied is entitled to credit for goods and services that it provided to Harker from the time of the voidable transaction until date of liquidation. They have used a start date for the running

_{account calculation}2 _{of 30
September 2010. The amount of the transaction that the}

2 They base this calculation on a start date of the point of Harker’s peak indebtedness to Allied within

the two year period, relying on Paul Heath and Michael Whale (eds), Heath and Whale on Insolvency

(loose leaf ed, LexisNexis) at [24.64] and Olifent v Australian Wine Industries Pty Ltd (1996) 130

FLR (SASC). This peak indebtedness rule was accepted by this Court in Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763. Allied did not contest the liquidators’ entitlement to choose this start date. Since this case was heard, I have rejected the application of the peak indebtedness rule in Shephard v Steel Building Products (Central) Ltd [2013] NZHC 189, relying on the observations of

$131,285 due to Allied as at 30 September 2010 and the sum due as at the date of liquidation of $67,635.50.

[6] One of the liquidators, Mr L J Haywood, has given two affidavits in support of the application (an initial affidavit in support, and one in reply to an affidavit for Allied), setting out the basis on which the liquidators say that Harker was insolvent at the time of the payment being challenged, and why they say that Allied received more than it would have received in the liquidation of Harker.

[7] Initially, in its notice of objection, and later its notice of opposition, Allied maintained that the liquidators’ had not discharged their onus of proving that this was an insolvent transaction under which Allied received a preference, as well as maintaining that it had a defence under s 296(3) of the Act. Allied’s notice of opposition was supported by an affidavit from its credit controller, Ms W E Thomson, who gave evidence of the trading relationship and the circumstances surrounding the payment on 21 October 2010 (it comprised payment of 10 invoices issued to Harker in July 2010). She also gave evidence of matters on which Allied relies to support its case that it received the payment in good faith and had no reason to suspect solvency, and that it gave value for the payment and altered its position in reliance on it. Ms Thomson was cross-examined on that affidavit.

[8] However, at the start of his submissions, counsel for Allied said that it was confining its opposition to the grounds of defence under s 296(3). This means that I do not have to determine whether submissions made by counsel for the liquidators in relation to whether this was an insolvent transaction. Counsel also advised in the course of the hearing that Allied was not pursuing its assignment that it had altered

the High Court of Australia in Airservices Australia v Ferrier (1996) 185 CLR 483, 623 that were cited in Heath and Whale on Insolvency [24.64] as militating against the arbitrariness of the liquidators selecting the starting point for the running account. The start of the period of the running account seems likely to be a matter of fact for each case. Allied has not sought leave to revisit the point in this case. As I will mention in the judgment, not only was there no contest on the point, but it became academic as Allied eventually limited its case to a defence under s 296(3) of the Act.

[9] As a consequence of the withdrawal of various grounds of opposition (all of which appear to me to be appropriate having regard to the evidence and submissions of counsel for the liquidators), the sole issue is whether Allied has made out the grounds for a defence under s 296(3) of the Act.

[10] Even if the liquidators establish that this was an insolvent transaction in terms of s 292, the Act provides Allied with a defence if it acted in good faith, there was no reasonable basis to suspect that Harker was or would become insolvent, and if it either gave value for the payments or altered its position in the reasonably held belief that the payments were validly made and would not be set aside:3

(3) A court must not order the recovery of property of a company (or its equivalent value) by a liquidator, whether under this Act, any other enactment, or in law or in equity, if the person from whom recovery is sought (A) proves that when A received the property—

(b) a reasonable person in A's position would not have suspected, and A did not have reasonable grounds for suspecting, that the company was, or would become, insolvent; and

(c) A gave value for the property or altered A's position in the reasonably held belief that the transfer of the property to A was valid and would not be set aside.

[11] A person relying on this defence must establish all three limbs of the defence.4 In respect of the first limb (good faith), it must show an honest belief that the payments did not involve any element of undue preference.5 If a creditor receives payment with knowledge that it has been treated differently or preferentially

_{to other creditors, it cannot claim that it received the
payment in good faith.}6

6 Pharmacy Wholesalers (Wellington) Ltd v Graham HC Auckland, CIV 2003-404-3312, 5 February

2004. This decision was reversed by Graham v Pharmacy Wholesalers (Wellington) Ltd (CA) CA37/04, 17 December 2004 (which appears to stand for the same point).

Further, if a creditor has actual or implied knowledge of the company’s financial

difficulties, it will not be able to argue that it received the payment in good faith.7

[12] To satisfy the second limb of the defence, the creditor receiving payment must show that a reasonable person with its knowledge would not have suspected insolvency (an objective test determined by reference to a prudent business person in the creditor’s shoes), and that the creditor did not know of matters providing reasonable grounds for suspecting insolvency (which has both a subjective and an objective element to it). The essential element of both is what will amount to

A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to “a slight opinion, but without sufficient evidence”, as Chambers’s Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence. The notion which “reason to suspect” expresses ... is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear that the situation of the payer is in actual fact that which the sub-section describes – a mistrust of the payer’s ability to pay his debts as they become due and of the effect which acceptance of the payment would have as between the payee and the other creditors.

[13] The Courts do not look for any single factor, but rather judge the matter on the basis of the contemporary knowledge of the recipient, including potentially countervailing factors, which tended to dispel suspicion at that time.9 While cash- flow problems can raise a suspicion of insolvency, they must be viewed in context and apparent cash-flow problems may be explained simply by a habit of delay in payment.10 Thus, a temporary lack of liquidity, is generally insufficient for a conclusion of insolvency.11 When approaching the question of suspicion, it is important to apply commercial reality, derived from the particular industry, to the

7 Rees v Bank of New South Wales (1964) 111CLR 210; Watchhorn Transport v Blanchett HC Hamilton CIV-2004-419-165, 23 November 2004.

8 Queensland Bacon Pty Ltd v Rees [1966] HCA 21; (1966) 115 CLR 266, at 303; applied frequently in New Zealand

Courts including the recent decisions of this Court in Blanchett v McEntee Hire Holdings Ltd, above n

_{2, and Jollands v Mitchill Communications Ltd [2011] NZHC 16; [2011] NZCCLR
20.}

11 _{Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666;
cited in Sutherland at [44].}

12 Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651, cited in Sutherland, above n 9, at

[14] Allied’s credit controller, Ms Thomson, stated in her affidavit that Allied had no knowledge of Harker’s financial difficulties when it received the payment in October 2010. She added that it knew of no matters to suggest that it was being paid ahead of other creditors. The liquidators accepted that they could not put forward any evidence to show actual knowledge but contended that the Court could infer knowledge from the fact that payment on 21 October 2010 was later than the agreed

60 day terms of credit, and from Ms Thomson’s evidence that both she and her general manager (a Mr Officer) called Harker’s accountant in August and September

2010, enquiring about payment. He also submitted that Ms Thomson’s credibility was questionable because she had failed to produce file notes of her conversations with the accountant (both in August 2010 and on earlier occasions).

[15] I find no reason to doubt Ms Thomson’s evidence. She was cross-examined by counsel for the liquidators, and impressed me as a truthful witness. In particular, I accept her evidence that:

(a) Harker was regarded as a substantial client that appeared to have significant assets, and up to the time of the payment in October 2010 always paid its bills.

(b) Allied had confidence in the trading relationship, and for that reason extended an initial 30 day period of credit to 60 days, and on occasion (there were two in 2010), agreed to extend that to 90 days if Harker made a reasonable case for that extension.

(c) It was not unusual for Harker not to adhere strictly to the credit period (it could go beyond for a few days), but that had never proved to be a problem.

normal course of Allied’s business (to confirm the timing and amount of payments for Allied’s own cash flow), rather than out of any concern about Harker, and that this practice was not confined to Harker.

(e) The call she made to Harker’s accountant in August 2010 was one of these routine calls, made well in advance of the due date for payment of the invoices in question (they were not due until 20 September

(f) She reviewed Allied’s creditors regularly with Mr Officer, and would have reported her August conversation with Harker’s accountant. Mr Officer’s call to the accountant in September was again a routine follow up, and as a consequence of that conversation Mr Officer agreed to extend the usual 60 day term to 90 days (and hence to 20

October), after being told that Harker had been short paid $200,000 by one of its customers but that money was due to be paid the following month). She referred to a similar arrangement having been made in about June or July in respect of invoices rendered in April, and to those invoices having been under the extended arrangement.

(g) She explained that she had not produced her contemporary notes of telephone conversations with Harker in her affidavit, because they were simply notes of routine enquiries and she did not see them as adding anything to her evidence.

[16] Ms Thomson also gave evidence that Allied had standard procedures for credit control, which included placing a stop on credit where it had any concerns that a customer could be in financial difficulty. She said that that is what occurred in December 2010, when Harker’s accountant told Allied that it could not pay accounts because it needed all its money to meet holiday pay obligations to its employees, and subsequently told Allied that Harker had been advised not to make any payments to creditors that month. She said this process would have been followed earlier if Allied had any concern about Harker’s solvency. She also said that Harker had no

reason to believe that it was being treated any differently from other creditors. In particular, she confirmed in cross-examination that Allied had no knowledge of Harker’s outstanding debt to the Commissioner of Inland Revenue (the Commissioner brought the application upon which Harker was eventually liquidated).

[17] On the basis of the above evidence, I find, on an assessment of all of the circumstances at the time, that Allied acted in good faith when it received the payment on 21 October 2010. In particular, there was no reason for Allied to view Harker’s liquidity issue in September 2010 as other than temporary.

[18] The liquidators also acknowledged that they were not in a position to give direct evidence to counter Allied’s evidence in respect of the second limb, but invited the Court to draw an adverse inference from what they submitted was a slowing of supply, coinciding with or following the payment on 21 October 2010. In support of this proposition, counsel for the liquidators pointed out that Harker ordered only

$12,000 worth of products following the payment on 21 October 2010, and compared that to the $88,000 purchased in July (the invoices in question), and even higher orders on previous occasions (in September 2009 Harker had purchased product to the value of $219,000).

[19] An analysis of the trading history does not support this argument. Ms Thomson produced a schedule of the trading history from July 2009 onwards. It shows that there was a wide fluctuation month by month in the value of products ordered, but a fairly consistent number of purchases: for example, there were 10 purchases in July 2010, 9 in August, 5 in September, 15 in October and 8 in November. The fluctuation in value no doubt relates to the particular job that Harker was undertaking at the time. There were several months in which the value of purchases was similar to that in November, and in April 2010 the value of purchases was only $2,799.46.

liquidators’ submission that there was an apparent slowing of supply. I also take into

[21] Viewing the position from Allied’s standpoint in October 2010, I am satisfied that there was no reasonable basis for Allied to have suspected insolvency, or for an objective observer to have done so. I find that Allied has established the second limb of the defence.

[22] This takes me to the third limb. As I have already stated, Allied advances its case under the third limb solely on the basis that it gave value for the payment.

[23] Counsel for Allied submitted that it had given value (for the purposes of s

296(3)) by provision of concrete to Harker on credit (it had had to order materials for making the concrete, and incur overhead costs, in advance of supply) and by discharging Harker’s obligation to meet the (prior) indebtedness upon receipt of the payment on 21 October 2010. He also argued that Allied had given value by continuing to supply concrete to Harker after the payment.

[24] Section 296(3) was introduced in its present form by the Companies Amendment Act 2006, with effect from 1 November 2007. The new section introduced the requirement to show that value had been given for the transaction as one of the ingredients of the defence. This aspect has had little judicial consideration until recently. Counsel for Allied acknowledged that such case authority as there

was at the time of the hearing13 required new value, given at time of receipt of the

impugned payment, but he argued that those cases should not be followed, and a wider approach to value should be taken as in Australia:

(a) Section 296(3) should be construed in the context that when Parliament modified the insolvent transaction regime in the Companies Amendment Act 2006, it followed closely the Australian regime, and should be taken to have included the defences available

13 Blanchett v McEntee Hire Holdings Ltd, above n 2, and Jollands v Mitchell Communications Ltd, above n 8. Counsel did not address Levin v Rastkar [2011] NZCA 210 where the Court of Appeal considered value in a slightly different context.

	(b)	The narrow approach to value adopted in the cases in New Zealand was undesirable as a matter of policy, given the longer period in
		which the regime applied (two years as distinct from six months in
		Australia), the language of the section (which did not expressly
		require new value) and the fact that the requirement for new value
		treated creditors far more severely than was the case before the
		Amendment Act removed the “ordinary course of business regime”.
	(c)	The purpose of the insolvent transaction scheme was more
		appropriately served by interpreting the requirement for value more
		widely, and in accordance with the interpretation of s 588FG(2) of the
		Corporations Act 2001 in Australia, on which s 296(3) was modelled.14
	(d)	The New Zealand authorities had conflated the two aspects of s
		296(3)(c), and if new value was required there would be little
		difference between giving value and acting in reliance on the payment. He said this would be too narrow a construction.
[25]	Sinc	e this case was heard, the Court of Appeal has released a decision on the

proper interpretation of s 296(3): Farrell v Fences & Kerbs Ltd.15 Three judgments under appeal16 had found that the present s 296(3) did not confine value to consideration given at the time of payment. In all three, the High Court accepted that the section should be interpreted in the same manner as the comparable section in the Australian legislation.17 In the last of the three18 the High Court took the view that a difference in wording (by inclusion in the New Zealand section of the phrase

_{“when A received the property”, which had a temporal
element) could be resolved by}

14 Relying on the decisions in Taylor v White [1964] HCA 11; (1964) 110 CLR 129 and Kyra Nominees Pty Ltd (in Liq) v National Australia Bank Ltd (1986) 4 ACLC 400 (both of which were dealing with the old defence of ordinary course of business but also recognised that discharge of a debt was valuable consideration) and Buzzle Operations Pty Ltd (in Liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109 which expressly found that release of a genuine debt was valuable consideration.

16 Farrell v Fences & Kerbs Ltd [2012] NZHC 2865, Farrell v ACME Engineering Ltd [2012] NZHC

reading the expression “gave value” to include value given by accepting the payment in satisfaction and release of the antecedent debt.

[26] The focus of the appeals was whether the High Court had been right to conclude that the creditors “gave value” under s 296(3)(c) merely by receipt of the payments in satisfaction of the antecedent debt owed to them by the companies.19

The Court of Appeal heard the appeals urgently, given the significance of the point for a number of similar pending cases.

[27] In addressing the central issue, the Court of Appeal reviewed the history of the section in the context of the development of voidable transaction legislation, and discussed the purpose of the legislation, before addressing the wording of the section and comparing it to the Australian legislation. The reasoning of the Court of Appeal addresses the arguments on the interpretation of “gave value” that were advanced by counsel for Allied. The findings of the Court of Appeal were:20

[86] We conclude that, with one exception, proof of all three elements of s 296(3) of the Companies Act 1993 is to be established at the time the payment or other company property is received. Specifically, in relation to s

296(3)(c), the giving of value must be proved to have occurred at that time and does not include value given to the company at the time the antecedent debt was created. This conclusion is supported by the authors of Heath & Whale on Insolvency.

296(3)(c) relating to alteration of position in the reasonably held belief that the transfer of the property was valid and would not be set aside. Although in some cases the alteration of position might occur contemporaneously with receipt of the property, it would typically occur after receipt. The legislation necessarily allows for that possibility.

[88] Our general conclusion is consistent with the clear wording of the section and the purpose of the legislation. Our interpretation differs from the approach adopted in the corresponding legislation in Australia. The policy adopted there is a perfectly legitimate approach but we have found that it has not been replicated in New Zealand. In particular, we do not accept the argument advanced for the respondents that s 296(3) was only intended to exclude gratuitous transfers such as a payment of shareholder dividends.

[89] Although we have found that all the elements in s 296(3) must be proved to exist at the time the property is received (subject to the exception noted), the court is entitled to consider any surrounding evidence that bears upon the position at the date of receipt. In other words, in considering

whether it has been proved that, at the time of receipt, “A” acted in good faith; would not have suspected the company was insolvent; and gave value for the property; the court may look to evidence not only at that date but also to evidence either side of that date.

[90] For practical purposes, the expression “when A received the property” must be interpreted with some degree of flexibility. The assessment need not be made at the precise moment in time when property is received, such as the time funds were credited to the payee’s bank account. For example, value might be given by a creditor’s agreement to provide further goods or services to the company in return for full or partial payment of the antecedent debt. The agreement to do so or the actual supply of further goods or services might precede the actual date of payment by a short period. Or, the provision of the goods or services might occur soon after the payment was received pursuant to a prior agreement to do so. Neither of these circumstances would preclude a court from concluding that value was given “when” the payment was received. A realistic commercial approach is required to make the legislation work.

[91] In the example just discussed, value is given for the property because the assets of the company are increased to the extent of the value of the goods or services provided. The respondents also seek to develop an alternative argument that the requirement for value to be given when the payment is made can be satisfied by the creditor forbearing to sue at the time of payment or by the creditor receiving the payment in satisfaction of the antecedent debt. On this approach, it is argued that value is given because the company is given further time to pay or because the company is discharged from liability for the debt.

[92] These issues were not addressed by the appellants in argument and only briefly by counsel for ACME. That was on the understanding that the alternative arguments and any remaining issues on ACME’s cross-appeal would be dealt with after the court’s decision on the issue raised by the appellants’ appeals.

[93] Accordingly, the final disposition of these appeals must be deferred until further argument on the remaining issue.

...the giving of value in terms of s 296(3)(c) of the Companies Act 1993 must be proved to have occurred at the time the payment or other company property is received and does not include value given at the time the antecedent debt is created.

[29] That decision disposes of Allied’s argument that it gave value by providing the concrete invoiced to Harker on credit. However, it does not necessarily dispose of its argument that it gave value by discharging the liability for the debt (which the

_{Court of Appeal reserved for further argument because it had not been
addressed}

sufficiently). It also leaves Allied’s argument that it gave value by continuing to

[30] Counsel for Allied based his argument that Allied had given good consideration for the payment by discharging Harker from its liability to meet the prior indebtedness, on a passage from the Australian text McPherson’s Law of Company Liquidation22 and a decision of the Court of Appeal of New South Wales, Buzzle Operations Pty Ltd (In Liq) v Apple Computer Australia Pty Ltd.23

[31] The Court of Appeal addressed both of these authorities in Farrell v Fences

& Kerbs Ltd, and rejected the proposition that they supported a construction that giving of value included value given when the original debt was created. It refrained from expressing a view as to whether satisfaction and release of an antecedent debt could constitute value for the purpose of s 296(3)(c) until it had heard further argument:24

[79] Nor do we consider that Buzzle supports the proposition that the giving of value in s 296(3)(c) includes value given when the original debt was created. At best, Buzzle supports the proposition that valuable consideration under the Corporations Act provision may be given by the satisfaction and release of the antecedent debt. However, it appears to be accepted in Australia that it will not generally be difficult to establish that valuable consideration has been given as appears from the following passages in McPherson’s Law of Company Liquidation:

In most claims by a liquidator in which it is alleged that the transaction was an unfair preference the defendant will have little difficulty in establishing valuable consideration. This is because, in the normal course of things, the debtor company will have paid the defendant the price, or part thereof, for services rendered or goods supplied and prior indebtedness is good consideration for a payment made in discharge of that indebtedness.

Where the company entered into a transaction that involved something other than a payment, the issue of valuable consideration may be a live one. As an example, if the company grants to the creditor security for an existing debt, the creditor must demonstrate that some valuable consideration was given for the security. In an appropriate case, “valuable consideration” can also be constituted by the promisee recipient suffering a “detriment” at the company’s request, such as the “satisfaction and release of an antecedent debt”.

22 M Gronow & R Mason (ed) McPherson’s Law of Company Liquidation (looseleaf 5th ed, Thomson

23 _{Buzzle Operations Pty Ltd (In Liq) v
Apple Computer Australia Pty Ltd, above n 14. .}

[80] The first of these passages addresses the relevance of consideration arising from the supply of goods or services that created the antecedent debt. In that respect, we have rejected the proposition that consideration given at the time the antecedent debt was created can be taken into account under s

296(3)(c). The second passage (and, in particular, the last sentence) raises an issue to be determined in due course.

[32] I do not regard the passage from McPherson’s Law of Company Liquidation as determinative of the law as to giving of value under s 296(3)(c). Buzzle was the only authority cited for the proposition in the last sentence of the second paragraph of the text. As the Court of Appeal commented in Farrell,25 that case concerned the interpretation of s 588FG(2)(c) in the context of an allegedly “uncommercial transaction”,26 (rather than an “unfair preference”): Buzzle (the insolvent company) which had acquired the stock and businesses of resellers of Apple computer products, had made substantial payments to Apple in discharge of debts due to Apple by the resellers and Apple had credited those amounts against the resellers’ account. The case concerned the early repayment of debt (hence the contention that it was an “uncommercial transaction”) and appears to be decided on the issue over the nature of the consideration. The New South Wales Court of Appeal commented that s

588FG(2)(c) did not require Apple to establish that it gave full consideration but just valuable consideration. In doing so, it commented that satisfaction and release of an antecedent debt was valuable consideration. 27 In my view the case does not assist a decision on what constitutes value under s 296(3)(c) as distinct from what I see as a different test in s 588FG of what constitutes “valuable consideration”.28

[33] I do not accept that there can be any value, for the purposes of s 296(3)(c), in discharging a liability for a debt where the value given at the time the original debt was created is not value for the purposes of the section. The release does not provide any further value or at least not any quantifiable additional value (in the present case, there is no evidence of it providing any further value) and would cut across the statutory purpose of the voidable preference scheme (as set out in Farrell). I accept

_{the submission of counsel for the liquidators that there must be some
quantifiable}

26 Which is not replicated in the same on even similar terms to s 297 of our Act, dealing with transactions at an undervalue.

27 _{Buzzle Operations Pty Ltd (In Liq) v
Apple Computer Australia Pty Ltd, above n 14, at 262.}

28 The Court of Appeal in Farrell v Fences & Kerbs Ltd, above n 15, also reserved this point for further argument: at [58].

benefit, apart from the original supply of concrete, to constitute value from the discharge. If that was not so, the focus of the voidable transaction legislation (recovery of unfair preference) would have to be undermined. There is support for this view in the view expressed in Re Seafresh New Zealand Ltd (In Liq), Ju v Vance29 that forbearance to sue does not have value for the purpose of deciding whether valuable consideration has been provided for the purposes of s 293 of the Act (dealing with voidable charges).

[34] This leads me to Allied’s last point, namely that it provided value by continuing to supply concrete after the payment. This would normally be advanced to support an argument that the creditor altered its position. I infer that Allied did not pursue that argument because of answers that Ms Thomson gave in cross- examination that Allied did not do anything differently after the payment.

[35] On this point I accept the argument of counsel for the liquidators that Allied cannot rely on the continued supply because the value of that supply has already been credited to it as part of the calculation of “the transaction” in applying the running account exception.

[36] For all of these reasons I find that Allied has not given value for the payment, in terms of s 296(3)(c), and therefore has not satisfied all of the requirements for the defence under s 296.

[37] For the reasons I have given, I find that the payment of $63,649.50 (out of the total payment of $88,722.41) made by Window Holdings Ltd (then named Harker Underground Construction Ltd) is an insolvent transaction in terms of s 292 of the Companies Act 1993 (being the difference between the amount owed by Window Holdings Ltd as at 30 September 2010 of $131,285 less the amount due as at date of liquidation being $67,635.50).

(b) Allied Concrete Ltd is to pay the liquidators $63,649.50, being the value of the transactions set aside, together with interest from the date of liquidation at the rate prescribed under the Judicature Act 1908.

High Court of New Zealand Decisions

Meltzer v Allied Concrete Limited [2013] NZHC 977 (6 May 2013)