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McIntosh v Fisk

McIntosh v Fisk

Case [2017] NZSC 78 26 May 2017

Insolvent Transaction

Fraud

Voidable Transactions

Insolvency Law

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IN THE SUPREME COURT OF NEW ZEALAND

SC 39/2016
[2017] NZSC 78

BETWEEN	HAMISH MCINTOSH Appellant
AND	JOHN HOWARD ROSS FISK AND DAVID JOHN BRIDGMAN Respondents

Hearing:	27 July 2016 (Further submissions received 31 October 2016)
Court:	William Young, Glazebrook, Arnold, OʼRegan and Ellen France JJ
Counsel:	Appellant in person M G Colson and L W Brazier for Respondents
Judgment:	26 May 2017

JUDGMENT OF THE COURT

A The appeal and cross‑appeal are dismissed.

BThe appellant is to pay costs of $15,000 to the respondents together with reasonable disbursements.

____________________________________________________________________

REASONS

Para No.
Arnold, O’Regan and Ellen France JJ	[1]
William Young J	[203]
Glazebrook J	[227]

ARNOLD, O’REGAN AND ELLEN FRANCE JJ
(Given by O’Regan and Ellen France JJ)

Table of Contents

Para No.
Ponzi scheme	[1]
Factual background	[2]
The proceedings	[9]
The liquidators’ claims	[13]
Equitable claim?	[15]
Property Law Act claim	[19]
Disposition	[24]
Disposition of property	[25]
RAM was a debtor	[27]
RAM was insolvent at the time	[30]
With intent to prejudice a creditor	[32]
Non-receipt of reasonably equivalent value	[40]
Requirements for Property Law Act claim met	[41]
Defences to Property Law Act claim: s 349	[42]
Companies Act claims	[47]
Transaction	[51]
Insolvent transaction	[61]
Requirements for Companies Act claim met	[65]
Defences to Companies Act claim	[66]
Section 297 of the Companies Act	[69]
Defences	[70]
Value defences	[74]
Allied Concrete	[81]
The appellant’s case on value	[85]
Initial “investment” of $500,000	[88]
Management fees	[116]
Use of money	[117]
Discharge by performance or accord and satisfaction	[121]
$500,000 was real and substantial value for $954,047	[130]
Conclusion on value defences	[136]
The change of position defence – Companies Act	[137]
The applicable principles	[138]
The sequence of events	[143]
The approach in the High Court and in the Court of Appeal	[156]
The arguments before this Court	[163]
Action in reliance?	[167]
Detriment?	[184]
Application of Property Law Act change of position defence	[192]
Approach to s 349(2)(b)	[194]
This case	[197]
Result and costs	[199]

Ponzi scheme

This appeal requires us to resolve issues arising from the collapse of a group of companies run by Mr David Ross as a Ponzi scheme. The principal operating company was Ross Asset Management Ltd (RAM). Prior to its collapse, RAM made a payment to the appellant, Mr McIntosh. The respondents, the liquidators of RAM, sought to claw back that payment. Whether they are entitled to do so depends on how the provisions of both the Companies Act 1993 and the Property Law Act 2007 dealing with the setting aside of dispositions by an insolvent company apply to the unusual facts of the case.

Factual background

The appellant entered into a funds management arrangement with RAM in April 2007. The contract between RAM and the appellant provided that the appellant appointed RAM as his agent to manage his investment portfolio. He paid $500,000 to RAM in 2007, having borrowed that sum from his bank. The contract provided that RAM would hold the funds…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McIntosh v Fisk

Details

AGLC: McIntosh v Fisk [2017] NZSC 78
Case: [2017] NZSC 78
Decision Date: 26 May 2017

CaseChat Overview and Summary

McIntosh v Fisk is an appeal and cross appeal against the decision of the Court of Appeal in McIntosh v Fisk [2016] NZCA 74, [2016] 2 NZLR 783, which involved claims by liquidators of a Ponzi scheme against a former investor for the recovery of funds paid to him by the Ponzi scheme. The Supreme Court dismissed the appeal and cross appeal and held that the liquidators were entitled to recover the full amount of the payment made to the appellant by the Ponzi scheme. The Court found that the liquidators’ claims under the Property Law Act and the Companies Act were well founded and that the appellant had not established any defences available to him. The Court held that the appellant had no defence to the liquidators’ claims under the Property Law Act, despite the unusual nature of the trust relationship between the Ponzi scheme and its victims. The Court also found that the appellant had failed to establish any of the defences available to him under the Companies Act, including the value defence and the change of position defence. The Supreme Court held that the liquidators were entitled to recover the full amount of the payment made to the appellant by the Ponzi scheme. The Court of Appeal’s decision to order the appellant to repay only part of the payment was reversed and the appellant was ordered to repay the full amount.

Orders