James Developments Limited (JDL) went into liquidation on 6 July 2009.

In November 2012, the liquidator issued proceedings against a trust for repayment of a loan, six years and one month after the loan was made.  The trustees argued the claim was time-barred.  The liquidator argued there had been a fraudulent cover-up of the loan and that the High Court should postpone the limitation period under section 28 of the Limitation Act 1950 (Act).

The main issue was what "reasonable diligence" under section 28 of the Act means and whether the liquidator should have uncovered the fraud earlier.  The Court stated that the legal test was "how a notionally competent liquidator with adequate resources would act if motivated by a reasonable sense of urgency". 

The Court held that "exceptional diligence" had been required to discover the fraud.  The fraud was not reasonably discoverable until 6 January 2011, 18 months after JDL's liquidation, and so the claim was not time-barred.

In Calvert v Reynolds [2016] NZCA 151, the Court of Appeal upheld the High Court's substantive decision that the trustees were liable for the $740,000, but considered that interest should run from the date the liquidator would have made demand on the trustees but for the fraudulent concealment (6 July 2009) and not from when that fraud was revealed in fact (27 June 2012). 

See Court decision here.