With Ebert Construction unsecured creditors owed $123 million, liquidators failed in their $2.04 million claim against related company Wakefield Plant Ltd. Wakefield provided Ebert’s working capital. Half Wakefield’s shareholding is hidden behind trustee company names; the other half mirror some shareholdings in Ebert Construction. Wakefield is not in liquidation.
In October 2018, Ebert Construction Ltd went into liquidation, insolvent. Work stopped on some fifteen worksites across the country. Bank of New Zealand was owed just over six million dollars. Liquidators identified that Ebert used related company Wakefield Plant as a conduit for BNZ funding. Wakefield had a multimillion dollar credit facility with BNZ. To smooth Ebert’s cashflow, Wakefield would drawdown the BNZ credit facility, passing funds to Ebert. As Ebert received progress payments on construction contracts, it would transfer funds from Ebert’s BNZ account to Wakefield’s BNZ account, reducing the amount owing on Wakefield’s BNZ credit facility.
Ebert liquidators sued under ‘claw-back’ rules in insolvency law demanding repayment of $2.04 million paid by Ebert to Wakefield over a three day period before BNZ pulled the plug appointing receivers. If successful, Wakefield shareholders would be forced to kick in money for Ebert creditors. Wakefield gained an advantage as an unsecured creditor, liquidators said.
Wakefield gained no advantage, Associate judge Lester ruled. Wakefield, together with Ebert, was jointly liable for all Ebert Group debts. Both companies had given BNZ security for its funding. The effect of these security documents was to create one group debt secured over all group assets. It was not a case of Wakefield acting as a standalone banker sneaking to the head of the queue by being repaid an unsecured loan, he ruled.
Shephard v. Wakefield Plant Ltd – High Court (9.03.20)
20.051