Personal Properties and Securities Act 1999, s 17 – secured property is present and future property of the banks – authority to appoint a liquidator – bank excluded from active participation in liquidation process under Companies Act 1993, s 240(1)(b) – bank granted leave to seek a declaration of the validity of the liquidator’s appointment – the validity of liquidators appointment dependent on provisions of Companies Act 1993 and general security arrangement – appointment deemed invalid
Bank of New Zealand v Grant  NZHC 1507 per Jagose J.
The Bank of New Zealand (BNZ) appointed receivers to Claymark Group, which owed the bank $50 million (plus interest), secured by first-ranking general security arrangements (GSAs).
The GSAs under s 17 of the Personal Properties Securities Act 1999 granted the bank a broad security interest in all the company’s present and future property.
Claymark Group agreed not to deal with the secured property without the bank’s consent, except in specific circumstances. In the event of a default, Claymark Group would lose the right to deal with the secured property.
At the request of the sole shareholder and director of Claymark’s parent, the bank appointed receivers to the parent and subsidiary companies. Later, the respondents were appointed as liquidators of the parent company and subsequently appointed themselves as liquidators of the subsidiaries. The validity of these appointments was at issue in the case.
The receivers argued only they could appoint liquidators as they owned the company’s property.
The bank sought leave to seek a declaration about the appointment of liquidators.
The bank’s standing depended on whether it could claim as a creditor under s 303 of the Companies Act or as a secured creditor under s 305.
Under s 240(1)(b), the bank was excluded from active participation in the liquidation process unless it surrendered or exceeded its security. Jagose J said the bank could make a claim as a creditor if its security was insufficient. He said there was a potential impact on secured creditors’ independence and the validity of the liquidators’ appointment, as the liquidators remained neutral.
As a result, leave was granted for the bank to seek its declaration. Various provisions in the Companies Act 1993 and the context of the GSA would determine whether the court ordered declaratory relief.
The parent company surrendered its conditional voting right to the bank under the GSA, leaving the liquidators without the power to exercise their shareholding right.
Jagose J said the liquidator’s control over the parent company’s assets did not impact the bank’s right to appoint liquidators for the subsidiary companies. As a result, the judge made a declaration that the respondent’s appointment as liquidators of the subsidiary companies was invalid.
Applicable principles: security interests – rights and restrictions under general security agreements – appointment of receivers and liquidators – personal property and securities – leave to seek declaration – impact of liquidators’ control
Held: Under s 241(1)(g) of the Companies Act, the bank was granted leave to seek a declaration of the validity of the liquidators’ appointment to the subsidiary companies. The respondent’s appointment as liquidators of the subsidiary company was deemed to be invalid.
Jamie Dierick is a law clerk working for an Auckland criminal defence barrister.