Voluntary administration disrupts contractors who do not get Construction Contract Act charging orders registered in time. They remain unsecured creditors with rights frozen.
Contractor Amstar New Zealand Ltd claims it is owed at least two million dollars by Lighthouse Property Development No.1 Ltd for work at an apartment complex on Auckland’s Karangahape Road. A 2020 Construction Contracts adjudication against Lighthouse went unpaid. The Act allows unpaid adjudications to be filed in court and a charging order registered over title to the project. This gives unpaid contractors security over the project they worked on.
Within two hours of Amstar filing documents in the District Court, Lighthouse appointed voluntary administrators.
Copied from Australia, voluntary administration sees control of distressed companies taken over by insolvency specialists. The intention is to have an independent specialist see if the business is worth salvaging. Legal action by unsecured creditors is suspended during administration; secured creditors still have freedom of action.
After its court filing, Amstar obtained a court judgment and registered a charging order against Karangahape Road. Amstar used this charging order as a bargaining chip; ongoing apartment sales could not be finalised without its approval.
The High Court ruled Amstar’s charging order was unenforceable. At the time Lighthouse directors handed over control to administrators, Amstar was an unsecured creditor. Rights as an unsecured creditor were frozen. Later steps to get a charging order were invalid.
re Lighthouse Property Development No.1 Ltd – High Court (23.12.20)
21.022