Madsen-Ries (as liquidators of Debut Homes Ltd (in Liq)) v Cooper - [2021] 1 NZLR 43

Bankruptcy and insolvency — Company law — Trading when insolvent — Belief that continuing to trade would reduce overall losses to creditors — Incurring new debts — Applying GST payments received to paying other creditors — When liability to account for GST arose — Giving preference to creditors where debt personally guaranteed by sole director — Whether breaches of directors’ duties — Whether test of honest belief subjective — Whether and when appropriate relief restitutionary — Observation on alternatives to liquidation — Companies Act 1993 ss 131(1), 135, 136, 301(1).

Company law — Insolvency — Trading when insolvent — Belief that continuing to trade would reduce overall losses to creditors — Incurring new debts — Applying GST payments received to paying other creditors — When liability to account for GST arose — Giving preference to creditors where debt personally guaranteed by sole director — Whether breaches of directors’ duties — Whether test of honest belief subjective — Whether and when appropriate relief restitutionary — Observation on alternatives to liquidation — Companies Act 1993 ss 131(1), 135, 136, 301(1).

Revenue — Goods and Services Tax — Property purchased with view to resale when company solvent — Property sold when company insolvent — When liability to account for GST arose — Goods and Services Tax Act 1985 s 8(1).