In Petterson v Browne  NZCA 189 a liquidator successfully appealed to the Court of Appeal and obtained orders under sections 295 and 299 of the Companies Act 1993 (Act) for certain payments and security to be set aside.
David Browne was a director and shareholder of Polyethylene Pipe Systems (PPS), David Browne Contractors (DBC) and David Browne Mechanical (DBM). After a significant claim against PPS had been notified by McConnell Dowell Constructors, Mr Browne arranged for PPS to repay unsecured loans that he, DBC and DBM had made to PPS. The unsecured loans were replaced by a fresh advance from Mr Browne to PPS secured by a general security agreement (GSA). PPS was subsequently placed into liquidation.
In the Court of Appeal, the liquidator of PPS successfully obtained orders:
- An order under section 299 of the Act setting aside the GSA granted by PPS to Mr Browne and requiring him to repay money that had been paid to him pursuant to the GSA. PPS did not satisfy the solvency test taking into account that contingent McConnell Dowell liability and no defence was available under section 296(3)
- An order under section 295 of the Act requiring DBC and DBM to repay the money they received from PPS, those transactions having been set aside after the company's failed to respond to notices served pursuant to section 294 of the Act. In particular, the Court concluded that there is no general discretion under section 295 based on just and equitable considerations for the Court to decline to make one or other of the orders specified in section 295 if a disposition is set aside and no defence under section 296(3) or at law or equity is made out.
See Court decision here.