Business Editor for the NZ Herald

Business Insider: Sheriff fixing to draw a bead on liquidators?

Long-delayed law could be about to set some standards.
Paul Goldsmith could be about to do a  High Noon  and run the bad guys out of town.
Paul Goldsmith could be about to do a High Noon and run the bad guys out of town.

Has it finally reached high noon for the insolvency industry?

Commerce Minister Paul Goldsmith, the unlikely sheriff riding slowly into town, will soon reveal whether he plans to tighten the reins on our loosely-regulated receivers and liquidators.

As it stands, any adult who is not a bankrupt can accept an insolvency appointment, regardless of their experience or qualifications.

However, pressure is building for change.

Lawyers Chapman Tripp recently used the case of Te Kauwhata liquidator Geoff Martin Smith to press the need for reform.

Smith was this year found to have fabricated a document - a legal notice which he claimed to have sent to a creditor.

"There is no 'fit and proper person' test for liquidators," the law firm said last week.

"No training, qualification, registration or licensing is required. New Zealand is unusual in that regard. It is a situation that ought to change."

Business Insider wonders if the comments might carry more clout given that Chapman Tripp partner Michael Arthur is a member of the Insolvency Working Group, which Goldsmith appointed to review existing laws and recommend any changes.

The group last week reported back to the Minister on possible amendments to the Insolvency Practitioners Bill, a piece of legislation that proposed a negative licensing scheme, but which was widely criticised before being consigned to the Parliamentary shelf.

While Business Insider applauds Chapman Tripp nailing its colours to the mast, it isn't the first big law firm to call for regulation.

Almost four years ago, Bell Gully's Murray Tingey and David Friar used the case of liquidator Patrick Norris to push for change.

Nelson-based Norris received $80,000 of a company's assets while he was its liquidator but used most of it to repay his practice's debts.

He was was later convicted of a single charge of theft by a person in a special relationship and sentenced to 10 months' home detention.

"Liquidators have very extensive powers. They can compel production of documents and people to appear before them. They have control of large amounts of money, " Tingey said this week when making the case for regulation.

Inside job

Lawyers aren't the only ones wanting action - so do some liquidators themselves.

KPMG's Vivian Fatupaito, also a member of Goldsmith's working group, is among them.

"I can't comment for the others but my personal point of view, having been in the industry for a very long time, I think it's a positive move and in line with other countries as well," she said on Thursday.

Brendon Gibson, chairman of a voluntary insolvency and restructuring association that self-regulates more than 90 members, echoed this sentiment.

"We are totally out of step with international practice ... we think it is entirely appropriate that there is some form of regulation around insolvency practitioners."

Paul Vlasic, co-director of Auckland's Rodgers Reidy Chartered Accountants, said almost all industries had some form of professional body to enforce minimum standards.

Commerce Minister Paul Goldsmith. Photo / Chris Loufte
Commerce Minister Paul Goldsmith. Photo / Chris Loufte

"If you want to become a plumber, a real estate agent or, say, a funeral director, then you need to be licensed and ensure that you meet recognised standards and comply with the rules and regulations of that industry. It gives the public a feeling of confidence that there is a safety net if it all turns to custard," he said.

"There is definitely a mood in the marketplace of many directors and shareholders feeling frustrated by the liquidation process.

"They assume the liquidator that they have appointed is suitably qualified and part of a professional body. They and the creditors then feel very disheartened that there isn't an industry body that they can go to for direction and clarity," Vlasic said.

"With no industry watchdog in place it's widely known that streetwise directors/shareholders will appoint particular liquidators to ensure that their company's liquidation is started then quickly closed with the minimum amount of fuss and no investigation of their prior actions."

Taxing work

Vlasic and co-director Derek Ah Sam pointed out that people convicted of tax offences are working as receivers and liquidators.

One is Porirua accountant Imran Mohammed Kamal, who pleaded guilty to charges of knowingly providing false tax returns and was sentenced to three months' home detention in 2013.

Another is Michael Edwin Kooiman, a Wellington businessman who was sentenced in 2011 to 12 months' home detention after admitting tax evasion.

Kooiman this week told Business Insider he didn't think the regulations would be strict enough to keep him out of the industry.

"I've not had a complaint in respect of any liquidation that I've done and I've not got any other convictions for tax. I don't think it's really an issue," he said. "I'm not against regulation, the current legislation is pretty loose ... but I've got many years experience in business restructuring and everybody makes a mistake here and there. A man that never made a mistake never made anything."

If a "fit and proper" person test was imposed, Kooiman believed someone in his position should be able to pass it.

Nowhere to turn

Well-known liquidator Damien Grant has also sparked a call for regulation, this time from a Tauranga woman.

Angela Moncur successfully defended a $146,000 claim from Grant and co-liquidator Steven Khov in both the High Court and Court of Appeal.

Moncur was a director and shareholder of Monocrane NZ, with her former husband Paul.

Under a relationship property agreement, Paul Moncur took full control of the company and agreed to shoulder the shareholders' current account debt.

He later wound up Monocrane NZ and the liquidators (Grant and Khov) issued High Court action against Angela Moncur to recover the current account liability.

Justice Patrick Keane, however, found that the relationship property agreement protected Angela Moncur from any liability.

In April, Justices Tony Randerson, Christine French and Stephen Kos rejected the liquidators' appeal.

Angela Moncur believes Grant and Khov unfairly pursued her and said she spent thousands of dollars and a huge amount of time defending herself.

"They carried on relentlessly," she said.

Grant did not wish to respond specifically to Moncur's comments but said it wasn't unusual for directors of wound-up companies to feel unfairly persecuted when liquidators sought to hold them liable for debts.

During the dispute, Moncur said, she had no place to turn to where she could voice her complaints about the liquidators.

"There was nowhere at all, no watchdog, Ombudsman or platform of any sort where I could get independent solid advice," she said.

Moncur also wants an organisation set up to police the industry and its operators.

Grant doesn't see that as the sector's most pressing concern.

"The biggest problem facing the insolvency industry isn't unaccredited and unregulated professionals - it is passive liquidators who don't even know where the High Court is, much less what to do when they get there," he wrote in a Herald opinion piece this week.

Goldsmith did not want to talk to Business Insider about the issue last week, but a spokesman said the Minister would be making an announcement in coming the weeks.

- NZ Herald

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