Liquidators need to be regulated - law firm

The Government is currently reviewing whether New Zealand's insolvency regime is fir for purpose. Photo / iStock

One of New Zealand's largest law firms says liquidators need to be regulated after one was found by a judge to have fabricated a document.

"There is no 'fit and proper person' test for liquidators," law firm Chapman Tripp said today.

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

These comments came after Te Kawhata liquidator Geoff Martin Smith was found by a High Court judge to have fabricated a document.

In November 2013, Smith was appointed as the liquidator of two companies that sold clothes and appliances out of trucks, typically in low-income neighbourhoods.

The following year, Andrew McKay was called in as receiver of the two companies by Westpac and a dispute emerged about his appointment.

McKay sought High Court declarations that he was validly appointed, entitled to the possession of the companies' assets and, if so, whether he was allowed compensation from Smith for dealing with these.

McKay eventually sought just over $540,000 from Smith, who earlier this year was barred from defending the claim after he failed to pay a costs order.

Before he was barred, Smith claimed he had given a notice to Westpac in December 2013 asking which rights the bank wanted to exercise over the companies' assets.

Smith claimed Westpac, by not responding, had abandoned its security over the assets.

But McKay believed this notice was sent much later than Smith claimed and said there was no reference to it in his or Westpac's files.

Smith also had convictions for tax evasion, theft, fraud and falsifying documents, McKay told the court.

As well as this, McKay said the photographs that Smith used to prove the notice was delievered in 2013 were of an envelope with a commemorative stamp only issued by New Zealand Post in October last year.

Justice Matthew Muir, in a judgment delivered this week, said he was satisfied the purported noticed was "fabricated".

The judge also accepted that between Smith's and McKay's appointments, the liquidator disbursed $852,998 from the companies' accounts.

This money was subject to Westpac's security and McKay could not ascertain how $540,000 of the funds were applied.

Justice Muir ordered Smith to pay McKay just over $540,000 plus interest.

Restructuring Insolvency & Turnaround Association of New Zealand chairman Brendon Gibson agreed that the judgment illustrated the need for regulation of the industry.

"The problem we've got at the moment is that it wasn't illegal him [Smith] taking the appointment as liquidator ... because the bar's so low," Gibson said.

The Government is currently reviewing whether New Zealand's insolvency regime is fit for purpose.

Smith did not return a message this afternoon.