Business Briefs

Eminem – importance of IP indemnities in agreements

The Court of Appeal[1] has ruled that the National Party must pay Eight Mile Style, the production company of prominent rapper Eminem, damages of $225,000 for breaching the copyright of Eminem’s song ‘Lose Yourself’. This decision highlights the importance of including intellectual property (IP) indemnity clauses in a contract.

An IP indemnity is designed to protect against loss for a breach of another’s IP rights. In this case, the National Party had bought the track ‘Eminem Esque’ to use in its 2014 election campaign advertisements. It relied on assurances from the licensor that it was not breaching copyright. The court found that using the track was, indeed, a breach of copyright.

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Business troubles? Bet you haven’t thought of these options…

Even the best of operators can face financial struggles and at such times a wounded business loses friends quickly.

When a business starts to look shaky, creditors will often tighten their trading terms for fear of suffering losses themselves. Assertive creditors may choose to seek liquidation of a company or bankruptcy of an individual. These options can lead to very poor outcomes. The result can be staggering liquidation costs, lost jobs for employees, lost owners’ equity, disruption for customers and losses to other creditors.


Sometimes it makes no sense for creditors to shut down a business. In these instances there are legal mechanisms available to companies and business owners to make compromises with creditors possible and, to an extent, put the fate of the company or the business owner/s in the hands of common sense.

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Property Briefs

Misrepresentations in property transactions: keep to the facts

The difference between ‘misrepresentations’ (which may support a claim for damages) and ‘mere puffery’ (being statements no reasonable person would take seriously) isn’t always clear. Enticing a purchaser into a contract by misrepresentations was a costly mistake by the vendor in a recent case. (1)

Aldrie Holdings Ltd (through its director Ms Laboyrie) purchased a farm for $2,900,000, but failed to make proper investigations before confirming the contract. Instead Aldrie chose to rely on statements made by Mr Prout, the vendor’s agent. Mr Prout boasted that the level of pasture, milking shed and water at the property were ‘excellent’. Given Ms Laboyrie’s general business experience, the judge held that these statements were clearly puffery as a reasonable purchaser would have made further enquiries to validate those claims.

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Creditors of Insolvent Companies


The Fences & Kerbs case may help you

As we approach the first anniversary of the Supreme Court’s decision in what is known as the Fences & Kerbs case (1) where three appeals were heard and ruled on together by the Supreme Court, we revisit the significance of the decision for creditors of insolvent companies and voidable transactions.

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What happens to Kiwisaver funds in bankruptcy?

fraud The Court of Appeal has recently confirmed what happens to a Kiwisaver account when a person is made bankrupt. The short answer is the bankrupt gets to keep their money.

Since the introduction of the Kiwisaver legislation there has been confusion and uncertainty around what happens to a person’s Kiwisaver account once they are made bankrupt. This uncertainty is caused by two seemingly incompatible provisions contained within two different Acts. On one hand the Insolvency Act says that all the bankrupt’s property belongs to the Official Assignee (the government employee who manages bankruptcies), Kiwisaver funds are property so those funds would belong to the Official Assignee. However, on the other hand the Kiwisaver Act says that unless a law ‘specifically’ requires the withdrawal of Kiwisaver funds then it is not possible to withdraw the funds unless the person is suffering financial hardship.

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Voidable Transactions – Can be a significant risk for businesses

When an insolvent company goes into liquidation it’s accepted that not all creditors will get paid 100 cents in the dollar. However it often comes as a shock to creditors when the liquidator requires them to refund payments that had been made up to two years before the company was liquidated.

The liquidator of a company has an obligation under the Companies Act 1993 to fairly distribute the company’s assets to its creditors. In doing so the liquidator may choose to claw back payments which the company made from up to two years before the liquidation. The liquidator then makes those funds available to the general body of creditors. The payments that are clawed back are called ‘voidable transactions’.

Voidable transactions pose a significant risk for businesses that trade on a credit basis; the construction industry is a particularly good example. In the last six years following the 2008 property market collapse, there have been numerous liquidations of companies throughout the construction industry and, consequentially, many demands for repayment of transactions considered ‘voidable’.

It’s about fairness to all

The voidable transaction regime, as contained in ss292-296 of the Companies Act, operates on the assumption that a liquidated company trades while insolvent for some time before it’s placed into liquidation. It’s therefore considered fair that all parties who traded with the company during that period of insolvency bear an equal burden of having traded with an insolvent company. While a demand from a liquidator to refund a, usually long overdue, payment may not seem that fair when you receive it, the overall objective of the voidable transaction regime is not to penalise creditors but to achieve fairness to all. This fairness is achieved by, in the words of the Court of Appeal, “swell[ing] the pool of funds available to the company to be shared rateably amongst all creditors”1.

Transactions are considered voidable under s292 if two criteria are met. First, the payment must have been made when the company was unable to pay its debts. Second, the payment must allow the recipient to receive more than they would have received in the company’s liquidation. During the six months immediately preceding the start of the liquidation, the company is presumed unable to pay its due debts. In other words, the first criteria is presumed to be met. Outside this period the liquidator must show evidence that the company was unable to pay its bills. Whether a payment allows the recipient to obtain more in a liquidation than they would have otherwise received is a straight comparison between the amount the recipient actually received and the amount that the recipient would have as part of the general body of creditors in the liquidation, had the payment not been made.

Transaction perhaps not voidable?

Under s296(3) transactions are not voidable if the recipient can demonstrate all three of the following when they received payment: they acted in good faith, a reasonable person in their position would not have suspected that the company was (or would become) insolvent, and they gave value for the property or altered their position in the reasonably held belief that the payment was valid.

While there‘s no sure way to avoid having payments clawed back under the voidable transactions regime, the following may limit your exposure:

  • If you supply goods on credit, ensure that those goods are the subject of a security interest properly registered on the Personal Property Security Register, and
  • If you have any reason to suspect that a company is facing financial difficulties, insist that all future transactions are conducted on a cash on delivery basis.


It’s also important that you respond promptly to a demand for repayment of a voidable transaction. If you don’t file and serve an objection notice within the statutory period of 20 working days, it may result in the liquidator’s decision being unchallengeable2 and, by default, you will required to make the repayment.


1 Farrell v Fences & Kerbs Limited [2013] NZCA 91

2 Bond Cargo Ltd v Chilcott (1999) 13 PRNZ 629