Following the appointment by the New Zealand High Court of Australian voluntary administrators of Probis as New Zealand interim liquidators of one of Probis’ creditors, Mars Cap, [see Australian voluntary administrators appointed as New Zealand interim liquidators – Murrays Legal] a director of Mars Cap has successfully had the interim liquidators replaced, because of concerns about their perceived independence. Messrs Fisk and Sanson (NZ) replaced Messrs Albarran and Kijurina as the new interim liquidators: Probis Financial Services Pty Limited (Administrators Appointed) v Mars Cap Limited  NZHC 2788 (5 October 2023) (nzlii.org)
The independence issue was contested. Associate Judge Sussock canvassed these various issues.
While the initial judge saw Albarran and Kijurina (A&K) as “suitable appointees for present purposes”, it did “not appear that the potential conflict set out above was addressed in that hearing”.
Section 280(2)(a) of the NZ Companies Act 1993 provides that unless the court orders otherwise, a creditor of the company is disqualified from being appointed or acting as a liquidator of that company. While A&K were not personally creditors of Mars Cap, their appointment raised potential conflict concerns that s 280(2)(a) substantively seeks to address and avoid. Furthermore, section 280(2)(c) prevents a person being appointed who has within the two years immediately before the commencement of the liquidation been a director of a creditor of the company.
As against that, it was argued that the work already undertaken by A&K both in Australia and other jurisdictions to try and trace funds flowing from Probis to Mars Cap showed that this was not a classic arm’s length liquidation and bore some similarities to the liquidation of a corporate group. If any issues did arise, application could be made to the Court for directions under s 284 of the Companies Act, “or a “conflict” liquidator may be able to be appointed, which is common practice in Australia”.
Also, other NZ decisions had allowed this type of conflict. In Application by Jackson (Forestlands)  NZHC 2447 (18 September 2018) (nzlii.org), the Court said that  while the proposed liquidators might
“technically infringe s 280(1)(a) of the Act. Such creditor relationship would not, however, be in a personal capacity and is unlikely to create any real conflict of interest. The objective assessment of inter- company positions is a routine part of the role which a professional liquidator must discharge with independence, competence and integrity. The Court has the commitment of the proposed liquidators to do so”.
The Associate Judge said that this and other decisions cited only raised a theoretical risk of conflict rather than a real risk.
While it was a very significant step to replace A&K, if there is to be a resolution with Probis in respect of the debt owing, then having that negotiation take place in a situation where the Administrators of Probis and the interim liquidators of Mars Cap were the same people may have caused difficulties. As an example, in reporting on a potential issue of dispute, the interim liquidators’ report said that “The Administrators of Probis are currently investigating these agreements and considering whether or not they should be treated as claims against [Mars Cap] or claims against Probis. …”.
The Judge said that determining how those claims should be treated placed A&K as the current interim liquidators in a difficult position. That they refer in their report to the “Administrators of Probis” investigating when they, as interim liquidators, are also Administrators of Probis highlighted the conflict. Other parties may be reluctant to provide documents and information to the interim liquidators if they consider that information will be used by the Probis’ Administrators in such investigations.
Interim liquidators must be required to be independent in the same way permanent liquidators are. The Associate Judge said that the other decisions cited only raised a theoretical risk of conflict rather than a real risk.
While it would be some time for new interim liquidators to come up to speed, the current interim liquidators had prepared a report for the Court that would be able to be used as a base.
And although not a determining factor, the hourly charge out rate of Messrs Fisk and Sanson as the new appointees was “considerably less than that of the current interim liquidators and so the cost of replacing the interim liquidators may not be significant in the end”.
Finally, A&K are administrators rather than liquidators of Probis. This would appear to heighten the potential risk of conflict as it has not yet been determined whether Probis will continue to operate or will go into liquidation. It may be that certain outcomes are preferable if Probis wishes to remain in business rather than go into liquidation and this again seemed to introduce a complicating factor.
The need to juggle conflicting appointments should generally be avoided. In an earlier NZ decision, ANZ National Bank Ltd v Sheahan and Lock  NZHC 3037;  1 NZLR 674;  NZCCLR 5 (15 November 2012) (nzlii.org), Australian liquidators of Australian companies recognised in NZ under the cross-border insolvency laws were also NZ liquidators of related NZ companies.
Transcript of a private examination in relation to one company was not kept confidential; that is, the New Zealand liquidators provided the transcript to themselves, as Australian liquidators, in breach of that confidentiality.
On a complaint being made, the Judge agreed, and said that the
“misuse arose out of an unthinking conflation of their roles as New Zealand liquidators and Australian liquidators. Had the Australian liquidators not been the same persons as the New Zealand liquidators, it is hard to imagine that the New Zealand liquidators would have supplied the examination transcript so readily”.
The Judge refused to give retrospective approval to the misuse of the transcript.
“Because [the liquidators] hold office as both Australian and New Zealand liquidators, they cannot, as Australian liquidators, assert that they did not know what they were doing, as New Zealand liquidators. In effect, they (as Australian liquidators) were parties to the misconduct of the New Zealand liquidators. There is the added point that the Australian liquidators are subject to the supervision of the Federal Court, not this Court”.