When a company is placed into liquidation (or voluntary administration), creditors will have the opportunity to submit claims for debts owing to them by the company.
Section 303 of the Companies Act 1993 (the Act) provides (with the exception of fines, monetary penalties, sentences of reparation, orders, and costs to which section 308 applies are not claims that may be admitted against a company in liquidation) that a debt or liability, whether present or future, certain or contingent, may be admitted as a claim. This includes both ascertained debts and liabilities for damages.
In cases where the value of a claim is uncertain due to contingencies, damages, or other factors, section 307 of the Act gives the liquidator the power to estimate the claim’s value or seek direction from the Court. This ensures that even unquantified claims can be processed fairly in the liquidation.
In Nayacakalou v Minister of Education, Justice Wylie held that section 303(1) uses “broad and inclusive language,” meaning virtually any debt or liability that can be expressed in monetary terms qualifies for proof in liquidation.[1] Notably, this extends to claims for damages in both contract and tort.[2]
The Court has recognized that future claims in tort, even if contingent, can constitute admissible claims against a company in liquidation. It is also not necessary for a cause of action to have accrued prior to or as at the date of liquidation.[3]
Understanding creditor claims in liquidation (or voluntary administration) is essential for protecting financial interests. The Act provides a broad and inclusive framework to ensure that creditors’ rights are upheld, even for contingent or future liabilities.
[1] Nayacakalou v Minister of Education [2017] NZHC 792 at [30] and Bunting v Buchanan [2012] NZHC 766, (2010) 11 NZCLC 98-005 at [44].
[2] Department of Internal Affairs v OTT Trading Group Ltd [2020] NZHC 3073 at [5].
[3] [3] Wellington City Council v Registrar of Companies [2015] NZHC 572, [2015] 3 NZLR 411
