The case was subsequently overturned by the Court of Appeal. Last week, the Supreme Court refused leave to appeal the Court of Appeal’s decision.
The result is that a liquidator can now exercise the statutory power to require information and documents from shareholders, creditors and others situated overseas, in some cases. The question in each case will be whether there is a sufficiently substantial connection with the activities of the company in New Zealand to justify the assertion of jurisdiction.
Background and High Court decision
The liquidators of two Auckland-based property development companies issued notices under section 261 of the Act to a US company, Arena Alceon NZ Credit Partners, LLC (Arena) and its security trustee, Quaestor Advisors, LLC (Quaestor). The liquidators considered that Arena and Quaestor failed to provide sufficient information in response to the section 261 notices and applied to the High Court for an order under section 266(1) compelling Arena and Quaestor to comply.
It is settled law that section 261 has extraterritorial effect for directors or former directors situated overseas, in part because they voluntarily assume duties under the Act. However, the position was unclear for persons other than directors.
Arena and Quaestor protested the jurisdiction of the Court to make orders against them. The High Court upheld their protest, ruling that sections 261 and 266(1) of the Act do not have extraterritorial effect against a person who is not a director or former director of a New Zealand company in liquidation.
Court of Appeal decision
The liquidators appealed the High Court’s decision, and the Court of Appeal issued its decision in
August 2024.2 The Court of Appeal considered that sections 261 and 266 have extraterritorial effect as a matter of necessary implication, even though these sections do not expressly state so, because the extraterritorial effect is necessary for the provisions to be effective. The Court held that it would be inconsistent with Parliament's intent for a person to be able to avoid an obligation under section 261 by leaving the jurisdiction.3
The Court of Appeal ruled that the provisions have extraterritorial effect to the extent that they apply to a person located overseas who has a sufficiently substantial connection with the activities of the company in New Zealand to justify the assertion of jurisdiction by the New Zealand authorities.4 This would include a creditor, shareholder or any other person.
In this case, Arena and Quaestor were found to have a very substantial connection to the activities of the companies in liquidation.5 Arena and Quaestor not only financed the development but also appointed receivers, who sold the development property to a company related to Arena. Arena also became a minority shareholder of one of the companies.
For these reasons the appeal was allowed, and the liquidators' application to set aside the appearance under protest to jurisdiction was granted.
Supreme Court decision
Arena and Quaestor applied to the Supreme Court for leave to appeal the Court of Appeal’s decision.
On 5 December 2024, the Supreme Court dismissed the application for leave.6 The Supreme Court held that the extraterritorial application of a liquidator’s powers under the Act may be a matter of general or public importance, but that the proposed appeal had insufficient prospects of success to justify leave, given the close connection that Arena and Quaestor had to the activities of the company in liquidation.7
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.
[1] Grant v Arena Alceon NZ Credit Partners, LLC [2024] NZCA 366.[2] At [21]-[22].[3] At [29]-[31], and [34].[4] At [39].[5] Arena Alceon NZ Credit Partners, LLC v Grant [2024] NZSC 166.[6] At [6].