Legal Research
Cases
McIntosh v Fisk

McIntosh v Fisk

Case [2016] NZCA 74 16 March 2016

Corporate Law & Governance

Insolvency Law

Type to search within this case.

For a Court ready (fee required) version please follow this link

IN THE COURT OF APPEAL OF NEW ZEALAND

CA384/2015
[2016] NZCA 74

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

Hearing:	19 November 2015
Court:	Harrison, French and Miller JJ
Counsel:	J B M Smith QC and J L W Wass for Appellant M G Colson and L W Brazier for Respondent and Cross-Appellant
Judgment:	16 March 2016 at 2 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

B The cross-appeal is dismissed.

C There is no order as to costs.

____________________________________________________________________

REASONS

Harrison and French JJ [1]
Miller J (dissenting on cross-appeal) [97]

HARRISON AND FRENCH JJ

(Given by Harrison J)

Table of Contents

Para No

Introduction  [1]
Facts  [6]
Statutory defences  [14]
First defence: giving value or valuable consideration  [16]

(a)       High Court  [16]
(b)       Principles  [19]
(i)    Legal relationship  [19]
(ii)   Antecedent debt or obligation and discharge tests  [22]

(c)       Payment  [30]
(i)    Deposit  [30]
(ii)   Balance  [41]

(d) Comparative jurisprudence [53]

Second defence: alteration of position [57]

(a)       Legal principles  [57]
(b)       Mr McIntosh’s financial circumstances  [63]
(c)       Decision  [72]
(i)     Purchase of 33 Palliser Road  [72]
(ii) Lost opportunity  [79]

Result [94]

Introduction

Subject to proving certain preconditions, the liquidator of a failed company is entitled to recover any payments made by the company to a creditor within the two year period before liquidation unless the creditor can prove that either he or she (1) gave value or valuable consideration for the payment or (2) has altered his or her position in the reasonably held belief that the payment was valid.[1] While these alternative defences are simply expressed, the application of the first to the facts at issue on this appeal and cross-appeal is not without its conceptual difficulties, and our decision on it will directly affect the rights and obligations of the company and many of its creditors.
[1]Companies Act 1993, s 296(3); Property Law Act 2007, s 349.
Ross Asset Management Ltd (RAM) managed funds deposited for investment by members of the general public. The company was the corporate ego of David Ross, a Wellington accountant. It appeared to be most successful, reporting substantial profits on investments in nominated securities. But the truth was otherwise.
Mr Ross operated an elaborate fraud, known colloquially as a Ponzi scheme. The reported securities were largely non-existent. He used new investments to repay maturing deposits, including a substantial but fictitious profit component. When it was placed in liquidation RAM’s liabilities exceeded its assets by at least $100 million. The company was, and had been for many years, hopelessly insolvent.
Hamish McIntosh was a depositor. Some four years after his original deposit, and about a year before its liquidation, RAM repaid Mr McIntosh’s deposit of $500,000 plus fictitious profits of $454,047, a total of $954,047. On the liquidators’ application to recover the payment MacKenzie J found that Mr McIntosh had given value for and was entitled to retain $500,000…

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 [2016] NZCA 74
Case: [2016] NZCA 74
Decision Date: 16 March 2016 at 2 pm

CaseChat Overview and Summary

McIntosh v Fisk is a case concerning the insolvency of a Ponzi scheme operated by Ross Asset Management Limited (RAM). Hamish McIntosh deposited $500,000 with RAM to establish and manage an international equity portfolio. RAM repaid McIntosh's deposit of $500,000 plus fictitious profits of $454,047, a total of $954,047. The liquidators of RAM applied to recover the payment. MacKenzie J found that McIntosh gave value for and was entitled to retain $500,000 of it. He was ordered to repay the balance of $454,047 because he had neither given value nor altered his financial position in the reasonably held belief that this element of the payment was valid. McIntosh appealed; the liquidators cross-appealed. The appeal was dismissed, the cross-appeal was dismissed, and there was no order as to costs. The Court found that McIntosh gave value for $500,000 of the payment by discharging RAM from its quantifiable liability to him in that amount. McIntosh gave no value for the balance of $454,047, known as the fictitious profits element. The Court concluded that McIntosh did not alter his position in the reasonably held belief that the payment was valid and would not be set aside. The Court found that McIntosh had failed to discharge his evidential burden of proving that his decision to buy 33 Palliser Road was causally linked to his receipt of RAM's payment in November 2011.

Orders