Vol 17 (2020) - Issue 2

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Re CBL Insurance Ltd (in liq) [2018] NZHC 2547, [2019] 2 NZLR 262: Comparative Assessment of the Powers of Interim/Provisional Liquidators in New Zealand and Other Jurisdictions

Synopsis

The High Court of New Zealand has recently considered, and clarified, the scope of the powers available to an interim liquidator under New Zealand legislation. An interim liquidator is the equivalent of the role of provisional liquidator in other jurisdictions. In doing so, the Court considered the historical role of the interim liquidator: to preserve the status quo pending the hearing of a liquidation application, in order to ensure that a company’s assets are available for distribution once the company is in liquidation. In certain jurisdictions (most notably, England & Wales and Hong Kong), the Courts have indicated a more flexible approach to that traditional role. The New Zealand Court’s decision reflects a more traditional approach, and illustrates the differences in the scope of the functions and powers of interim liquidators in New Zealand compared to other jurisdictions.

The case arises out of the collapse of the CBL group of companies, a worldwide insurer and reinsurer listed on the New Zealand stock exchange. Interim liquidators were appointed to the New Zealand based operating insurance company, CBL Insurance Limited ('CBLI'), in February 2018. Due to numerous factors, the liquidation hearing was repeatedly delayed (and was not held until November 2018). In September 2018, the interim liquidators sought directions from the Court as to whether they had the power to enter into a commutation agreement with CBLI’s largest creditor and cedent. The effect of this commutation agreement would have settled the claim of the company’s largest creditor, but would have reduced the pool of liquid assets available to the remaining creditors. Courtney J of the High Court (as she then was) held that the interim
liquidators did not have the power to enter into such a transaction.