The Court of Appeal's judgment in McIntosh v Fisk, released this month, regarding liquidators' ability to claw back payments made by Ponzi schemes to investors would have gone very differently but for the Supreme Court's landmark ruling last year in Fences & Kerbs on the meaning of "gave value".

The majority expressly noted that, had they not felt bound by the Supreme Court's interpretation, they would have agreed with the minority and required the investor to pay back not just the fictional profits, but also the profits of his capital investment.

We look at the reverberations last year from Fences & Kerbs and speculate on their continuing effect this year.

Case volume

Ten judgments dealing substantively with the claw-back of voidable transactions under section 292 of the Companies Act 1993 were issued last year, three at appellate level.1 The courts found:

  • for the liquidator(s) in five cases - three of which resulted in a full recovery while in the remaining two, the liquidators were allowed to recover only part of the claimed amount, and
  • for the creditor in four cases.

The other case2 was an appeal from two different decisions, one in which the result was for the creditor and the other in which the liquidator achieved partial recovery.

Key principles

Case law developments in 2015 have clarified a number of key concepts in the voidable transactions regime.

"Gave value"

Because in a voidable transactions claim, "value" given by a creditor at the time of the original transaction is sufficient to satisfy the "gave value" limb of the good faith defence in section 296(3)(c), this defence will be available to any creditor that received a payment in good faith without knowledge of insolvency. (See Allied Concrete and Chapman Tripp's commentary on it.)

The broader nature of the defence and its focus on subjective elements increases the burden faced by liquidators who seek to challenge a creditor's lack of knowledge or suspicion of insolvency (see Madsen Reis and Levin v Donovan Drainage).

Peak indebtedness

The start of the "continuing business relationship" is the beginning of the specified period, not the point of "peak indebtedness". (See Timberworld and Chapman Tripp's commentary.)

Continuing business relationship

A continuing business relationship will exist only where payments made between a company and its creditor are for the purpose of securing more than the payment of a pre-existing debt – i.e. payments must be for the purpose of maintaining an ongoing business relationship with anticipation that the creditor will provide further goods or services for credit. (See Galvanising v Fisk.)

Ponzi profits

While investors may be able to invoke the s 296(3) defence up to the amount of their initial investment on the basis that "value" was given to the Ponzi scheme, the High Court found in Fisk v McIntosh that liquidators may be entitled to recover payments representing the purported yield on the investment for which there was no "value" given.

This decision has since been confirmed by the Court of Appeal in McIntosh v Fisk.


Courts have discretion over what orders to make and whether to make any at all under section 295 of the Act. (See Petterson.)

Payments by a third party

Payments made under a direct deed are vulnerable to being clawed back under the regime. (See Sanson v Ebert and Chapman Tripp's commentary.) An appeal of this decision is to be heard in August.

Notice requirements

Defects in a creditor's notice of objection will not necessarily result in the notice's invalidity. A creditor is likely to be given the opportunity to be heard despite a technically defective notice. (See Madsen Reis v Bryant.)


Whether payments to secured creditors are voidable remains a difficult question. A first instance Australian decision, Matthews v The Tap Inn3 found that the appropriate time to assess the value of a creditor's security was at the date of the company's liquidation. On appeal, the South Australian Supreme Court set that decision aside, on the basis that it should not have been decided as a preliminary question. The Court gave no further guidance on the application of the regime to secured creditors. (See The Tap Inn v Matthews)

From a policy perspective, payments made to a secured creditor may come from secured assets. If so, the payments do not prejudice unsecured creditors. It would therefore be artificial to compare the position with the outcome on liquidation, when the secured assets are no longer present.

This matter has not been addressed at appellate level in New Zealand. In 2014, New Zealand's High Court in Grant v BB2 Holdings Limited considered how the voidable transactions regime related to security, resulting in a complex analysis somewhat different to the recent Australian decision.

What's ahead?

We can expect further clarity in the application of the regime to emerge as courts apply the above principles in future voidable transaction cases.

Chapman Tripp will continue to track and report on the treatment of voidable transaction claims by the courts in the post Fences & Kerbs climate.


1 Allied Concrete v Meltzer (2015) 11 NZCLC 98-031, Timberworld v Levin [2015] 3 NZLR 365, Galvanising Ltd v Fisk (2015) 14 TCLR 204, Ruscoe & Anor v McKeown Group Ltd, Fisk v McIntosh (2015) 11 NZCLC 98-033, Madsen Reis v Donovan Drainage and Earth Moving Ltd [2015] NZHC 1081, Madsen Reis v Bryant [2015] NZHC 2267, Zenith Kitchen & Joinery Ltd (in liq), Re Levin v BCS Holding Account Ltd [2015] NZHC 1564, Grant v McKenzie [2015] NZHC 1958, Sanson & Ebert Construction Ltd [2015] NZHC 2402. Various other interlocutory matters and costs decisions relating to the voidable transactions regime are not included in this total.

2 Timberworld v Levin [2015] NZCA 111

3 Matthews v The Tap Inn Pty Ltd [2015] SADC 108