Pulling hire equipment from a building site months before an insolvent developer went under negated benefit of the so called ‘running account’ defence, requiring Kiwi Hire and Sales repay $48,000 received in the four months prior to Vijay Holdings liquidation.
Vijay Holdings Ltd signed up in 2019 to build the Nido store in West Auckland, on a fixed price contract: $37.8 million. There were cost overruns of some seven million dollars, according to the liquidator’s initial report.
The High Court was told Vijay’s unsecured creditors owed $1.8 million will get nothing.
Hire company Kiwi Hire and Sales Ltd disputed liquidator’s demands it return payments received prior to Vijay Holding’s November 2020 liquidation, leaving it to prove as an unsecured creditor.
Companies Act rules require payments received by suppliers in the six months prior to insolvent liquidation be repaid; onus is on the supplier to justify keeping the money.
Special rules apply to payments made by insolvent companies on trade accounts where goods or services have been supplied by businesses on a regular basis with payments typically expected to be settled monthly; so-called ‘running accounts.’
Strict application of the six month rule would see regular suppliers having to repay monthly payments received for up to six months prior to liquidation, with no credit for supplies delivered over that same period.
The ‘running account’ defence allows suppliers to look at their net position over that six month period. If payments received exceed value of goods or services supplied in that period, the net difference has to be returned.
Kiwi Hire and Sales supplied hire equipment to Vijay for use on site, billed monthly.
The High Court ruled Kiwi Hire must repay $48,000 received after it removed all its hire equipment from the Nido build site in June 2020, some five months before Vijay Holdings went into liquidation.
There was no on-going business relationship at the time subsequent payments were received; no ‘running account’ existed. It ended earlier, when Kiwi Hire took back all its equipment.
Grant v. Kiwi Hire and Sales Ltd – High Court (27.02.26)
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