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transactions, 59 the provisions clearly state the purpose of making orders is to restore
to original position had no transactions have taken place.
In New Zealand, the Companies (Amendment) Act 2006 has substantially changed
the law on preference found in section 292. The heading of the section has been
substituted with insolvent trading voidable. It allows the liquidator to apply to set
aside the transaction provided the transaction falls within the definition of insolvent
transaction and it occurred within a time specified. 60 An insolvent transaction is a
transaction which was entered into at the time when the company is unable to pay its
debts and the effect would have enabled the person to receive more than he or she
would have received in the company‘s liquidation. 61
Likewise, in Re Excel Freight Ltd (in liq); Waikato Freight & Storage (1988) Ltd v
Meltzer, 62 the Court of Appeal looked at the parliament‘s intention in enacting the
provision. The purpose of preference has shifted in the 1993 Act from intent to
effects; whether the transaction has a preferential effect instead of whether the
company has the intention to prefer one creditor over the other. Nevertheless, the
court went on to state it was not the intention of parliament to make absolutely
voidable all transactions which have preferential effects. Instead, a balance has to be
made between the interests of creditors in general and the creditor who received
payment which has preferential effect. The existence of protection accorded a
creditor who received payment in the ordinary course of business despite having
preferential effect, showed the Parliament intended a commercially unremarkable
payment to stand. (emphasis added). Section 295 of the New Zealand Companies
59 See section 238(3) of the UK Insolvency Act 1986.
60 Section 292(2)(a) of the New Zealand Companies Act 1993.
61 Section 292(2)(b) of the New Zealand Companies Act 1993; see also In Countrywide Banking
Corporation v Dean [1998] 1 NZLR 385 at 394. The Court of Appeal decided the interpretation of
"ordinary course of businesses must be viewed objectively and the focus should be on the ordinary
operational activities of businesses as going concerns not responses to abnormal financial
activities."
62 (2001) 9 NZCLC 262, 504 at 262,509-262,513.
321