View/Open - Research Commons - The University of Waikato

company is using funds belonging to creditors. Rather, it would be in the interests of
shareholders to continue trading with the hope of gaining profits at the expense of
creditors. 224
Therefore, the duty to prevent insolvent trading would not be in the interests of
shareholders but of the creditors. The court then clarified, in the judgment, that
section 135 requires an assessment of the position of creditors as a body rather than
individual creditors. 225 It seems that the court has incorporated the position in
common law into section 135. 226 A similar thought is echoed in Re BM & C B
Jackson (in liq) 227 in which the court stated that any remedy payable to the company
under section 301(1)(b) will be distributed pro rata among the unsecured creditors,
although the action is brought by an individual creditor.
The case of Lower v Traveller 228 also interprets the duty to the company in section
135 as a duty to a general body of creditors. This is shown in the judgment when the
court stated ―one measure of the worsening of the company‘s position is of course
the increase in its creditors. As the duty under the statute is one owed to the
company, the assessment is properly related to the claimants on it rather than
individual complainants.‖ 229
224 See details in Chapter 5 of this thesis.
225 Fatupaito v Bates [2001] 3 NZLR 386 at 404.
226 See Walker v Wimborne (1976) 3 ACLR 529; Kinsela v Russell Kinsela Pty Ltd (1986) ACLR
395; Nicholson v Permakraft (N.Z) Ltd [1985] 1 NZLR 243. see also discussion in Chapter 2 of
the thesis.
227 (2001) 9 NZCLC 262, 612.
228 [2005] 3 NZLR 479.
229 Lower v Traveller [2005] 3 NZLR 479 at 499.
361