A couple who lost more than $100,000 to liquidators will now try to get some of their money back following a Supreme Court ruling today.
The court unanimously reversed an earlier Court of Appeal ruling on liquidators' power to 'claw back' money paid to contractors by companies that end up being insolvent.
Under the Companies Act, liquidators have been able to 'claw back' money from individuals or companies who were paid up to two years before their appointment.
Three firms, Allied Concrete, Fences and Kerbs and Hiway Stabilisers New Zealand, all appealed against the earlier Court of Appeal decision.
They said that decision meant that if a subcontractor was paid upfront for work done for a company later found to be insolvent, that money can then be taken by a liquidator.
Decision 'too late' for some
Lois Murtagh and her husband, Gordon, did $96,000 worth of welding work for Contract Engineering in 2013.
They were paid an initial lump sum of $30,000 and then instalments of $10,000 a week.
But 18 months later, Contract Engineering went into liquidation and Ms Murtagh got a letter demanding all the money back.
"We had done the work. We'd supplied all the goods. We'd done it all," she said.
"Then we had to turn around and pay it back. We were gutted."
Ms Murtagh ended up paying the liquidator $75,000 but after a legal battle, the cost spiralled to about $140,000.
"It was very hard. It was very stressful. My husband has ended up having stents put in his heart, I don't know if that's resulted from the stress of it. But it was just hard."
They managed to hold onto their main welding business, but had to liquidate another.
Ms Murtagh said the Supreme Court decision may have come too late for them, though they would try to get money back, but at least it would be a big help to others like them.
"We've got a meeting with a lawyer to discuss it and see whether it's possible to get some of ours back as well," she said.
"But at the end of the day when you're a little Joe Bloggs, it's totally unfair."
Delight at decision
One of the three companies that went to the Supreme Court was Fences and Kerbs.
It also did some work for Contract Engineering and liquidators asked the fencing company for $58,000 back.
Owner Mike Field held off paying up and now he would not have to.
"I'm very delighted. We needed it, the country needed it. Pleased that's finished and now the little guys have something to go to court with now."
President of the Specialised Trade Contractor Federation Graham Burke said contractors would be able to relax knowing their money was safe.
"People who supply goods and services on credit can now rest easy knowing that those payments are secured in the future," he said.
Liquidator warn creditors will lose out
Peter Farrell, a liquidator in the case, said clawing back would now carry extra risk.
"Liquidators will be a lot more careful in trying to claw back. I would say there will be less attempts to claw back payments."
"It will make recovering voidable transactions harder for liquidators," he said
He said some creditors would now lose money when companies went bust.
The Supreme Court ordered all liquidators involved in the three appeals to stop trying to get any contractors' money back.
It also ordered each of them to pay $10,000 plus legal costs.