Losing Sight of Certainty: An Analysis of New Zealand's Voidable Transaction Regime in Light of Fisk v. McIntosh
33 Pages Posted: 8 Nov 2016
Date Written: November 8, 2016
The Fisk v. McIntosh decision concerns a payment received by an arms-length investor upon exiting a Ponzi scheme. The scheme’s liquidators have claimed the entirety of the payment of $954,047 as a voidable transaction under the Companies Act 1993. The High Court and the Court of Appeal held that the original deposit of $500,000 can be retained by the investor, but as the investor did not give value for the balance, that part of the payment must be returned. This article analyses the interpretation of ‘value’ in s 296(3) of the Act by both the High Court and the Court of Appeal and argues that both Courts took into account public policy and other factors that are not supported by a strict interpretation of the provision and existing jurisprudence. It argues that if an equivalence test is read into the defence, this will result in the courts being required to undertake time consuming and fruitless assessments of quantum. It also argues that courts must give priority to commercial confidence and fairness to individual creditors over a remorseless application of parity-based logic wherever a payment has a preferential effect. It concludes that in order to maintain clarity in New Zealand’s company law and ensure its purpose is upheld, creditors should remain entitled to keep payments received in good faith, with no suspicion of insolvency and for which they provided real and substantial value.
Keywords: Fisk v McIntosh, Companies Act, voidable transaction, liquidation, Ponzi
JEL Classification: K00, K10, K19, K39, G33
Suggested Citation: Suggested Citation