Businesses take advantage of clogged High Court to delay payments

Debtors are gaming the long waits for proceedings in the High Court in Auckland with some businesses counting on delays of up to six months to stave off creditors seeking liquidations.

Accounts Enforcement managing director Wal Britton says this means businesses are using their creditors – often small and medium sized enterprises – as personal banks.

Creditors seeking payment after exhausting ordinary options to recover their bills could issue a demand notice which had to be paid within 15 days – but if that went unanswered, Mr Britton said, enforcing an insolvency through the courts could take up to another six months. Businesses may eventually cough up, but the use of that cash was lost during the wait, and could cause cash-strapped creditors to go to the wall.

The government has taken steps to speed up the superior courts after criticism earlier this year, although these mainly affect the larger commercial and criminal cases, which are heard on a separate list. Most insolvency and liquidation applications, as well as summary judgments, are heard by the two associate judges at the High Court in Auckland.

The recent Criminal Procedure Bill reformed rules for the High Court allowing its judges to send criminal trials around pure methamphetamine (“P”) to the district courts. “P” trials tend to be long and evidence heavy, no matter the seriousness involved. This amendment was expected to unclog the High Courts to some extent, but did not address wider concerns in the legal community about the way the High Court managed its caseload.

In February NBR reported on a New Zealand Bar Association conference about the future of litigation, where eminent lawyers argued the High Court had become bogged down.

Chapman Tripp partner Jack Hodder and Jim Farmer QC said that the court system had failed business as the cost and time for civil cases in the High Court had blown out. A common theme was that court rules encouraged too much irrelevant material to be introduced into proceedings.

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