LEVIN V MARKET SQUARE TRUST CA CA224/05

LEVIN V MARKET SQUARE TRUST CA CA224/05 18 April 2007IN THE COURT OF APPEAL OF NEW ZEALAND CA224/05 [2007] NZCA 135BETWEEN HENRY DAVID LEVIN AS LIQUIDATOR OF ONE ITALY LIMITED (IN LIQUIDATION) Appellant AND MARKET SQUARE TRUST Respondent Hearing: 24 August 2006 Court: Chambers, Randerson and John Hansen JJ Counsel: S E Cameron for Appellant S W Greer and B M K Pamatatau for Respondent Judgment: 18 April 2007 at 4 pmJUDGMENT OF THE COURT A The appeal is allowed. B The payment of $35,768.74 made to the respondent on 29 March 2004 and referred to in the appellant's notice dated 25 November 2004 is set aside under s 294 of the Companies Act 1993. C The respondent must pay to the appellant the sum of $35,768.74 under s 295 of the Companies Act 1993. D The costs order made in the High Court in the respondent's favour is set aside.E The appellant is entitled to costs with respect to the High Court proceeding. If the parties cannot agree those costs, application should be made to the High Court for that court to determine quantum. F With respect to costs in this court, the respondent must pay to the appellant $5,000, plus usual disbursements. REASONS OF THE COURT(Given by Chambers J)A voidable preference claim[1] One Italy Limited, a company now in liquidation, leased business premises from Market Square Trust. It was frequently behind with the rent. On 19 February 2004, the trust made demand for immediate payment of the rent arrears and threatened re-entry if One Italy did not pay. [2] One Italy did not pay, but four days later advised the trust that it had entered into an agreement to sell its business to a company called Peek Developments Limited. The purchase price was $239,000. Under the agreement Peek paid One Italy a deposit of $70,000. The agreement was conditional: one of the conditions was the trust's consent to the assignment of the lease. [3] The trust advised Peek that its consent was conditional on One Italy paying the arrears and undertaking certain repairs on the premises. Subsequently the trust softened its stance. On 29 March 2004, Paresh Ganda, the trust's solicitor, advised McVeagh Fleming, Peek's solicitors, that the trust would consent to the assignment provided arrears of $35,768.74 were paid that day. McVeagh Fleming, on behalf of their client, direct credited the trust that day. We shall explain later in these reasons the circumstances under which Peek came to make the payment of what was One Italy's debt.[4] For reasons which have not been explained, the sale of One Italy's business to Peek did not proceed. [5] One Italy was placed into liquidation by the High Court on 17 June 2004. Later, One Italy's liquidator, Henry Levin, the appellant, served on the trust a notice under s 294 of the Companies Act 1993. He claimed the payment to the trust by Peek's solicitors was a voidable transaction by One Italy in terms of s 292 of the Act. Under that notice he sought the recovery of the sum paid. [6] The trust applied to have the liquidator's notice set aside. Associate Judge Sargisson held the transaction was not to be set aside: Market Square Trust v Levin(2005) 9 NZCLC 263,935. From that decision the liquidator has appealed.The relevant legislation[7] This appeal turns on ss 292 and 294-296 of the Companies Act. For ease of understanding the argument, we set out the relevant parts of those sections:292 Transactions having preferential effect(1) In this section, transaction, in relation to a company, means – (a) a conveyance or transfer of property by the company: (b) the giving of a security or charge over the property of the company: (c) the incurring of an obligation by the company: (d) the acceptance by the company of execution under a judicial proceeding: (e) the payment of money by the company, including the payment of money under a judgment or order of a court. (2) A transaction by a company is voidable on the application of the liquidator if the transaction – (a) was made- (i) at a time when the company was unable to pay its due debts; and (ii) within the specified period; and(b) enabled another person to receive more towards satisfaction of a debt than the person would otherwise have received or be likely to have received in the liquidation- unless the transaction took place in the ordinary course of business. (3) Unless the contrary is proved, for the purposes of subsection (2), a transaction that took place within the restricted period is presumed to have been made – (a) at a time when the company was unable to pay its debts; and (b) otherwise than in the ordinary course of business. 294 Procedure for setting aside voidable transactions and charges(1) A liquidator who wishes to have a transaction that is voidable under section 292 or a charge that is voidable under section 293 set aside must – (a) file in the Court a notice to that effect specifying the transaction or charge to be set aside and, in the case of a transaction, the property or value which the liquidator wishes to recover, and also the effect of subsections (2), (3), and (4); and (b) serve a copy of the notice on the other party to the transaction or the grantee of the charge and on every other person from whom the liquidator wishes to recover. (2) A person – (a) who would be affected by the setting aside of the transaction or charge specified in the notice; and (b) who considers that the transaction or charge is not voidable – may apply to the Court for an order that the transaction or charge not be set aside. (3) Unless a person on whom the notice was served has applied to the Court under subsection (2), the transaction or charge is set aside on the 20th working day after the date of service of the notice. 295 Other ordersIf a transaction or charge is set aside under section 294, the Court may make 1 or more of the following orders:(a) an order requiring a person to pay to the liquidator, in respect of benefits received by that person as a result of the transaction or charge, such sums as fairly represent those benefits: 296 Additional provisions relating to setting aside transactions and charges (3) Recovery by the liquidator of property or its equivalent value, whether under section 295 or any other section of this Act, or under any other enactment, or in equity or otherwise, may be denied wholly or in part if – (a) the person from whom recovery is sought received the property in good faith and has altered his or her position in the reasonably held belief that the transfer to that person was validly made and would not be set aside; and (b) in the opinion of the Court, it is inequitable to order recovery or recovery in full. Issues on the appeal[8] Four issues arise on this appeal. [9] The first is whether the payment to the trust was a payment by One Italy for the purposes of s 292(1). The judge found it was not. She found it was a payment by Peek, and accordingly was not a "transaction" for the purposes of s 292: at [60]. In light of that finding, the trust had to succeed. The liquidator contends the judge was wrong on this point. He asserts the payment was by One Italy and thus potentially caught by s 292. [10] Because of the judge's finding on that first issue, she did not need to go on to consider the other relevant criteria under ss 292 and 294-296. We have, however, reached a different view on the first issue from the judge's. Accordingly, we must now proceed to consider the remaining "defences" advanced by the trust.[11] The second issue is: was the payment made at a time when One Italy was unable to pay its due debts? That issue arises under s 292(2)(a)(i). The trust claims One Italy was able to pay its due debts as at 29 March 2004, but the liquidator disputes this. [12] The third issue is: did the payment fulfil the criteria of s 292(2)(b)? [13] The fourth issue arises if we find the transaction should be set aside and prima facie the trust should refund the money it received. The trust claims in those circumstances that relief should be denied wholly or in part under s 296(3) on the basis that it received the money in good faith. The liquidator disputes that. Accordingly, the fourth issue is: did the trust receive the money in good faith? [14] There are other criteria under the relevant sections which need to be fulfilled. None of them is, however, in dispute. Counsel are agreed the appeal turns on the four issues we have identified. [15] We shall now proceed to consider these issues in turn.Was the payment to the trust a payment by One Italy for the purposes of s 292(1)?[16] The judge noted the starting point as being "that, as a matter of fact, Peek made the payment directly to Market Square on behalf of One Italy. One Italy did not make the payment itself.": at [31]. [17] The judge acknowledged there were circumstances in which it is "possible to regard a payment by a third party as a payment by the company": at [38]. But, she found, those circumstances did not apply here. The judge's essential reasoning was summed up at [58]:In this case, One Italy never had any entitlement to the money paid by Peek and therefore the payment made by Peek would never have been in the available pool of assets for distribution to other creditors. The payment by Peek to One Italy has not therefore diminished the pool otherwise available to creditors.[18] Ms Cameron, for the liquidator, submitted that, while on its face the payment was made by Peek, the payment was made out of One Italy's money. On the authorities, she contended, that made it a "payment of money by the company [One Italy]" in terms of s 292(1)(e). [19] We accept Ms Cameron's submission. What happened in this case is Peek lent One Italy $35,768.74 so that the arrears of rent owed by One Italy could be paid. The details of the loan were recorded in correspondence between the parties' solicitors. The loan itself was secured under a general security agreement between One Italy and Peek. That agreement, in which One Italy was described as "the debtor" and Peek was described as "the secured party", was guaranteed by One Italy's director, Stephen Ashby. The parties' agreement recorded that the sum lent was to be applied immediately "to the landlord or the landlord's solicitor on account of rent and opex arrears". One Italy's solicitors, Frost and Sutcliffe, gave Peek a personal undertaking that they held "an irrevocable authority and instruction from One Italy" to that effect. [20] The agreement provided that the sum lent would be "deducted from the purchase price for the business" on settlement. The parties further agreed that, "should the sale of the business to Peek not proceed for any reason, then those further monies (and the deposit of $70,000 already paid) will be refunded to Peek immediately". We should explain at this point that the reference to "further monies" was a reference to the $35,768.74 and any further amounts which Peek might advance to One Italy prior to settlement to ensure that the landlord did not re-enter. It is clear from the correspondence that there was a concern that One Italy might default again prior to settlement; the trust had expressly reserved its rights regarding re-entry should further default occur. [21] In either event, the loan would be repaid. In the former case, it would be repaid by set-off. [22] As Ms Cameron submitted, this case is on all fours with National Bank of New Zealand v Coyle (1999) 8 NZCLC 262,100 (HC). In that case, a Mr Norton, who was a beneficial shareholder of a company, helped reduce the company'soverdraft with the National Bank. The company subsequently went into liquidation and the liquidator sought to recover from the National Bank the payment which Mr Norton had made on the company's behalf. The bank disputed that it was required to refund it, arguing it was not a payment of money by the company in terms of s 292(1)(e). Panckhurst J did not agree (at 262,102):The submission that the payment of 16 May 1997 was not a payment of the Company is untenable. Whilst it was made by Mr Norton from his personal resources and direct to the Bank, there can be no question that it was in substance an advance to the Company by legal and beneficial shareholders to bring the overdraft facility under control. I have no doubt that but for the intervention of the liquidation, the advance would have been recorded as such in the books of the Company with a corresponding increase to the current accounts of Messrs Goosman and Purser who in turn held one third of their 51% shareholding on trust for Mr Norton.[23] If anything, the present case is even clearer, as here the loan arrangement was recorded in correspondence and an appropriate security instrument drawn up and signed. [24] In our respectful view, Associate Judge Sargisson fell into error when she concluded that "Peek did not owe money to One Italy under the sale and purchase agreement at the time of payment, and nor did Peek make the payment using funds which in reality belonged to One Italy as a result of a loan": at [55]. It is true that at the time of payment, settlement under the sale and purchase agreement was not due. But Peek's payment was not made under the sale and purchase agreement; it was made pursuant to a later and separate loan agreement. Contrary to Her Honour's view, Peek did make the payment "using funds which belonged to One Italy as a result of the loan". [25] The answer to the first issue, therefore, is that the payment to the trust was a payment by One Italy for the purposes of s 292(1).Was the payment made at a time when One Italy was unable to pay its due debts?[26] Mr Greer, for the trust, accepts the payment occurred within "the restricted period" as defined in s 292(6). Therefore, unless the contrary is proved, the paymentis presumed to have been made at a time when the company was unable to pay its debts and otherwise than in the ordinary course of business: s 292(3). [27] Mr Greer submits the trust rebutted the presumption. He submits that at the time of the payment the agreement for sale and purchase of the business was on foot and was expected to settle on 20 May 2004. At that time, One Italy would receive $169,000. One Italy's only debts, he submits, were the rent arrears owed to the trust of $35,768.74 and other debts of about $59,000. Mr Greer disputes Inland Revenue's proof of debt of $348,000. Mr Greer's conclusion on this issue was as follows:When the anticipated sale proceeds ($169,000) are taken into account it is apparent that One Italy was in a position to pay its due debts of $94,830.77 at the time the payment was made.[28] We do not consider the trust has rebutted the presumption. On the contrary, we think it clear on the evidence before us that One Italy was unable to pay its debts. The reasons for our conclusion are largely those Ms Cameron advanced in her submissions. [29] First, when assessing whether a company is unable to pay its due debts, care must be taken in counting as assets cash resources which are available only if the business is sold: Re Timbatec Pty Limited (1974) 24 FLR 30 at 36-37 (NSW SC). Mr Greer's calculation treats the $169,000 as if it were money in the bank. But it was, of course, the balance of the purchase price for the business and thus only available if the sale transaction was concluded. The agreement at the time of purchase was still conditional, and as we know never did settle. Why the transaction did not settle is not explained. There is no evidence, however, that One Italy regarded Peek's failure to settle as a breach of contract. That Peek took steps to have its deposit and loan repaid suggests the agreement never became unconditional. [30] Secondly, it is quite unreal to ignore the debt owed to Inland Revenue. Mr Greer's justification for ignoring that debt was the lateness of the filing of Inland Revenue's proof of debt following the liquidation. That is, however, irrelevant to an assessment as to whether, at the date of the challenged payment, One Italy was unable to pay its debts. The facts are that One Italy had not paid anyPAYE tax in respect of its employees since August 2002. GST returns also had not been made since 2002. By 29 March 2004, over $300,000 was outstanding to Inland Revenue (including penalties). The amount outstanding had increased still further by the date of liquidation. That at the time of payment there was a substantial debt owed to Inland Revenue cannot be disputed. [31] Thirdly, as Ms Cameron submitted, there was ample other evidence proving One Italy was unable to pay its due debts. Mr Ganda himself referred to One Italy's having been "habitually late in payment of rate and opex". He said that on numerous occasions he had had to make demand for payment of outstanding rent and opex and had threatened re-entry. Indeed, from documentation on his file, he recounted that he had put One Italy on notice on at least nine occasions between October 2002 and December 2003 that, if payment arrears were not brought up to date immediately, the trust would re-enter. He said these threats usually resulted in payments, although he was never sure from which bank account the payments came. Mr Ashby, he said, "seemed to operate a number of different bank accounts for various restaurant businesses which he controlled". Indeed, what had prompted Peek's payment on 29 March 2004 was Mr Ganda's threat that, if arrears were not met that day, the trust would re-enter. [32] Finally, we note that many of the unsecured creditors had been unpaid for some time. Some creditors who subsequently lodged proofs of debt had debts dating back to October 2001. The creditor whose debt led to the successful application to liquidate the company had been owed money since August 2002. It had filed its application on 24 November 2003. [33] The second issue must be decided in favour of the liquidator.Did the payment fulfil the criteria of s 292(2)(b)?[34] Under s 292(2)(b), the liquidator must show that the payment "enabled another person to receive more towards satisfaction of a debt than the person would otherwise have received or be likely to have received in the liquidation". Somewhat surprisingly, those comparatively simple words have been the subject of conflictinginterpretation. Very similar wording is to be found in the new s 292(2)(b), as inserted by s 27 of the Companies Amendment Act 2006. (That Act has not yet come into force.) [35] The first interpretative issue is whether the liquidator must prove only that the creditor has likely received more than would otherwise have been the case in the liquidation or whether the liquidator must in addition prove that the general body of creditors has been disadvantaged as a result of the treatment afforded to one of their number. [36] The second issue is whether the test for preference under s 292(2)(b) involves a comparison of what the payee has received with what he or she would have obtained in a hypothetical liquidation on the date of the payment, or whether the correct comparison is with what the payee is likely to receive in the actual liquidation. [37] We turn to the first of these interpretative conundrums. Ms Cameron submitted it was "a strain on the plain meaning of the words to read the section as requiring the general body of creditors to be worse off". She urged us to approve those High Court decisions holding that the paragraph meant what it said, without the gloss placed upon it by some judges. Even if she was wrong in that submission, however, she said the liquidator in this case had satisfied either test. Mr Greer on the other hand urged the other interpretation. He submitted we should apply "the underlying philosophy behind s 292 which is to ensure that the general body of creditors is not disadvantaged as a result of the treatment afforded one of their number". [38] We are clear Ms Cameron's submission is correct. All the liquidator must show in order to satisfy s 292(2)(b) is that the creditor received a greater payment than he or she would otherwise have received in the liquidation. In that regard we approve the High Court decisions of Chatfield v Mercury Energy Limited (1998) 8 NZCLC 261,645 and Cobb & Co Restaurants Limited v Thompson (2004) 9 NZCLC 263,638.[39] In the former, Randerson J said with respect to s 292(2)(b) (at 261,655):As already explained, the focus of s 292(2)(b) is very different [from the focus of its predecessor section, s 309 of the Companies Act 1955]. It is not concerned with the overall effect of the transaction on the assets of the company. Rather, it is concerned with whether the creditor has received a greater payment than it would otherwise have received in the liquidation.[40] Associate Judge Lang (as he then was), although not mentioning Chatfield by name, came to the same conclusion in Cobb & Co Restaurants. He said he was initially attracted to the argument that s 292 caught only transactions which were to the disadvantage of other creditors: at [17]-[18]. In the end, however, he rejected that argument, saying at [18]:Upon reflection, however, I consider that the payment is in fact subject to the statutory regime. It was a payment made in respect of an antecedent debt, and as such it allowed one unsecured creditor, namely Cobb & Co, to be paid in full when other unsecured creditors have not been so fortunate. If recovery is to be denied to the liquidator, it should be denied through the application of the statutory provisions, the most relevant of which for present purposes is s 296(3).[41] We agree with the approach adopted by Randerson J and Associate Judge Lang. It is consistent with the position in Australia. Phillips JA, with whom Charles JA agreed, said in Walsh v Natra Pty Limited [2000] 1 VR 523 at 538 (CA):Moreover, counsel's argument depended very much on the submission that overall the general body of unsecured creditors was not being prejudiced; the general pool of creditors was no worse off, he said, after the transaction than before. I am by no means clear that that is an argument that still runs under the new s 588FA [of the Corporations Law]; the section does not in terms look to the effect of the transaction on "other creditors", as did the former law. Here the question is, in terms at least, whether the transaction results in the creditor receiving more than it would in a winding up if the transaction were set aside and the creditor were to prove – which as I have said invites a comparison between a return in this case of 100 cents in the dollar on $40,000 and a dividend of nothing in the winding up. The effect of the transaction on "other creditors" does not per se have a part to play in the comparison required by s 588FA, although it might perhaps become material in certain circumstances when an order for repayment was being sought under s 588FF [the Australian equivalent of our s 295].[42] This approach is also consistent with the plain wording of s 292(2)(b), which requires a comparison between the amount the creditor actually received from the company and the amount that creditor would have received as part of the general body of creditors in the liquidation had the payment not been made.[43] Panckhurst J's view to the contrary on this issue in National Bank of New Zealand v Coyle at 262,104 is overruled. [44] We now turn to the second interpretative issue. Mr Greer submitted the test for preference was what the payee would have received on a hypothetical liquidation on the date of the payment. He acknowledged there was a New Zealand authority directly against this proposition, namely Re Yukich Brothers Limited (in liquidation), Porter Hire Limited v Blanchett (2006) 9 NZCLC 264,070, but he urged us not to follow that case and to adopt instead what McLelland J had held in Spedley Securities Limited (in liquidation) v Western United Limited (in liquidation) (1992) 27 NSWLR 111 (SC). [45] We do not take up Mr Greer's invitation. We have no doubt that Associate Judge Doogue was right to hold in Yukich that "the degree of any preferment is to be measured against what the creditors would receive in the actual liquidation": at [22]. We agree with the judge that Spedley may be distinguished on the basis that the equivalent section in the Australian Bankruptcy Act 1966 was differently worded from ours: unlike our s 292(2)(b) it did not refer to what the payee "would otherwise have received or be likely to have received in the liquidation". [46] We further agree with Associate Judge Doogue that, quite apart from these textual considerations, the hypothetical liquidation concept would "impose considerable practical difficulties on liquidators if they had to carry out an assessment of whether there were creditors at the time of the asserted act of preference and then to calculate whether the creditor in the impugned transaction received a preference against other creditors extant at the point of the transaction, with that matter to be tested on the basis that a notional liquidation is carried out at that earlier date": at [24]. [47] In addition, it is important to remember that although all material matters arise in the transaction itself, the end result, the "preference", does not (in fact and in law) occur until the liquidation itself: see NZ Associated Refrigerated Food Distributors Limited v Pierce & Tubbs (2000) 8 NZCLC 262,186 (HC).[48] In any event, the Victorian Court of Appeal in Walsh has now made clear that the concept of the "hypothetical liquidation", if ever correct, is no longer the test under the new Corporations Law: at [34]. [49] Mr Greer submitted that, if the Yukich test is followed, "the creditor is held accountable for events concerning the company subsequent to the transaction over which the creditor has no control or notice". But the legislature has addressed that issue by defining the "specified period" prior to liquidation in which transactions of this kind may be voidable. And, in any event, considerations of "fairness" do not arise at this stage of the s 292(2)(b) assessment. That assessment is purely objective. Considerations of fairness (using that concept loosely) arise later in the regime, when the court is considering what orders, if any, to make under s 295 or whether to deny the liquidator recovery under s 296(3). Under s 296(3) the question of whether the creditor has notice of the insolvent state of the company will be directly relevant to determining whether the payment has been received in good faith. [50] Having determined these interpretative issues in the liquidator's favour, we now turn to the substantive third issue. That can be simply answered. The payment to the trust enabled it to receive payment of all arrears of rent and operating expenses. That is a significantly better return than the trust would otherwise have received or be likely to have received in the liquidation. That is because One Italy has no funds or assets available for distribution to creditors. According to Mr Levin, the amount owing to unsecured creditors at the date of liquidation exceeded $400,000. [51] The third issue, therefore, must also be decided in favour of the liquidator. [52] Since all other matters under s 292 are not in dispute, it follows that the transaction, namely the payment of $35,768.74 made to the trust on 29 March 2004, must be set aside under s 294 of the Companies Act.Did the trust receive the money in good faith?[53] Given the findings to this point, the liquidator is prima facie entitled to an order under s 295(a), requiring the trust to repay the sum paid to it. The trust has claimed, however, that relief should be denied on the basis that it received the money in good faith: see s 296(3). [54] Mr Greer accepted that the trust bore the onus of establishing all the elements of s 296(3). The first matter the trust must establish, therefore, is that it "received the property in good faith". The test of "good faith" has been clearly established by this court. The recipient of the property or money must show that he or she honestly believed that the transaction would not involve any element of undue preference either to himself or herself or to any guarantor: Re Orbit Electronics Auckland Limited (in liquidation), W H Jones & Co (London) Limited v Rea (1989) 4 NZCLC 65,170, approved in Re Number One Men Limited (in liquidation), Meltzer v Axiom International Limited (2001) 9 NZCLC 262,671. The cases show that a creditor is likely to fail this test where he or she has actual or implied knowledge of the company's financial difficulties, due to the company's cheques being dishonoured, its failure to pay its debts on time, or other circumstances indicating serious cash-flow problems: Howes and others Brookers Company and Securities Law(looseleaf ed) at [CA296.03(1)]. [55] We do not consider the trust has established it received the money in good faith (as defined above). We consider Ms Cameron's submissions on this point unanswerable. She listed the following matters as indicating the test had not been met. [56] First, she referred to the fact that the payment was a lump sum payment of all arrears. This was totally outside the party's normal terms and patterns of payment. [57] Secondly, the payment was made following at least ten threats of re-entry under the lease. This must have signalled to the trust that One Italy was having financial difficulty.[58] Thirdly, on 1 September 2003, One Italy's director had written to Mr Ganda, explaining that he had suffered a "massive loss of in excess of $750,000 with [his] Oceans restaurants". He said that he was endeavouring to sell assets "in order to get re-established on a sound financial footing". He said he hoped to "pay off" the trust shortly. But, as Mr Ganda well knew, that hope was not fulfilled. One Italy continued to be behind in its rent. In due course, Mr Ganda learned that One Italy was selling its business because of its financial difficulties. [59] Fourthly, it is very significant that Mr Ganda was not prepared to rely on One Italy's solicitor's undertaking to pay the arrears from the proceeds of sale on settlement. Nor would he accept a solicitor's undertaking to pay to the trust the money which One Italy was to receive from Peek. According to Peek's solicitor, Mr Ganda asked for the money to be paid direct by Peek to the trust. Mr Ganda has given no explanation as to why he wanted that. Ms Cameron submits that this suggests he was concerned about the possibility of the money either not being paid or being clawed back if One Italy went into liquidation. We agree that that inference can be drawn from that request. [60] Finally, Mr Ganda was aware that One Italy did not have sufficient cash reserves to make the payment of arrears. It had to obtain an advance from Peek to make the payment. [61] We accept that those factors, taken together, mean that the trust has not shown it received the payment in good faith. [62] In light of that finding, we do not need to consider the other elements of s 296(3). All we will say is we consider Ms Cameron's submissions with respect to why the trust did not establish the other elements persuasive as well. [63] The answer to the fourth issue is therefore that the trust has not established it received the money in good faith. In those circumstances, it is not appropriate to deny the liquidator recovery of the preferential payment.[64] It is right that there be an order under s 295(a) requiring the trust to pay the liquidator the sum of $35,768.74. [65] There is some doubt as to whether an award of interest can be made under s 295. We do not resolve that point as, even if interest can be ordered, this is not an appropriate case for such an order. There was a very real question as to whether this payment was caught by s 292, as shown by the fact that Associate Judge Sargisson came to a different view on that topic from the one we have adopted. In those circumstances, the fair result is that the trust should now repay the sum it received.Conclusion[66] The appeal is allowed. Orders are made as set out in the formal judgment. It is appropriate that the liquidator should have costs both in the High Court and here.Solicitors: Lowndes Associates, Auckland, for Appellant Ganda and Associates, Auckland, for Respondent