RE CBL INSURANCE LTD (IN LIQ) [2018] NZHC 2547

RE CBL INSURANCE LTD (IN LIQ) [2018] NZHC 2547

The application was dismissed because execution of the proposed commutation agreement by interim liquidators was beyond their statutory powers under s 246 when measured against the statutory purpose of maintaining the value of the company's assets; the proposed transaction would divest substantial assets and effectively resolve a major creditor's claim in a manner that is ordinarily for a liquidator or collective creditor processes and is disputed on the evidence, so cannot be authorised as within interim liquidators' powers.

Citation
[2018] NZHC 2547
Parties
Interim Liquidator (applicant): Kare Johnstone; Interim Liquidator (applicant): Andrew Grenfell; Creditor (largest) / Respondent: Elite Insurance Ltd; Regulator / Consenting Party: Reserve Bank of New Zealand; Shareholder / Opposing Party: LBC Holdings Ltd (in administration); Company / Opposing Party: CBL Insurance Ltd (CBLI); Creditor (second Largest) / Opposing Party: Alpha Insurance Ltd
Court
High Court
Jurisdiction
New Zealand
Judgment Date
28 September 2018
Procedural Posture
Application for Directions Under S 284 Companies Act 1993 in Context of Interim Liquidation / Directions Hearing During Interim Liquidation Pending Substantive Liquidation Hearing (pre Substantive Hearing)
Outcome
Application for directions dismissed
Legal Topics
Interim Liquidation, Powers of Interim Liquidator, Compromise/commutation of Claims, Court Directions Under S 284, Confidentiality and Access to Court Documents
Company Law Insolvency Law Insurance Regulation Civil Procedure (confidentiality/open Justice) Interim Liquidation Powers of Interim Liquidator Compromise/commutation of Claims Court Directions Under S 284 +1 more

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Parties

Kare Johnstone

Interim Liquidator (applicant)

Andrew Grenfell

Interim Liquidator (applicant)

Elite Insurance Ltd

Creditor (largest) / Respondent

Reserve Bank of New Zealand

Regulator / Consenting Party

LBC Holdings Ltd (in administration)

Shareholder / Opposing Party

CBL Insurance Ltd (CBLI)

Company / Opposing Party

Alpha Insurance Ltd

Creditor (second Largest) / Opposing Party

Procedural Posture

Application for Directions Under S 284 Companies Act 1993 in Context of Interim Liquidation / Directions Hearing During Interim Liquidation Pending Substantive Liquidation Hearing (pre Substantive Hearing)

Legal Issues

  1. 1 Whether interim liquidators have power under s 246 and s 284 to enter a commutation/compromise agreement extinguishing a large creditor claim by divesting substantial assets
  2. 2 Whether executing the commutation agreement is within the statutory purpose of maintaining the value of the company's assets
  3. 3 Whether the court should grant directions where a decision is effectively a commercial judgment of the liquidator

Ratio Decidendi

The application was dismissed because execution of the proposed commutation agreement by interim liquidators was beyond their statutory powers under s 246 when measured against the statutory purpose of maintaining the value of the company's assets; the proposed transaction would divest substantial assets and effectively resolve a major creditor's claim in a manner that is ordinarily for a liquidator or collective creditor processes and is disputed on the evidence, so cannot be authorised as within interim liquidators' powers.

Court Disposition

Application for directions dismissed

Orders

  • Application for directions dismissed
  • Existing confidentiality orders continue in relation to access to the court file and publication of material related to the directions hearing until the date of the substantive liquidation hearing or earlier by consent