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Not Even Due. Or is it? The Supreme Court of New Zealand broadens the concept of Due Debts

David Browne Contractors Limited and David Browne Mechanical Limited v David Ross Petterson as Liquidator of Polyethylene Pipe Systems Limited (In Liquidation) [2017] NZSC116

The recent decision of the Supreme Court of New Zealand in David Browne Contractors v Petterson has clarified as to when a contingent liability is to be regarded as a ‘due debt’ in New Zealand, even though in one sense such a claim may not be a debt nor due. 

The Court found that a contingent debt will be regarded as a ‘due debt’ if a ‘reasonable and prudent business person’ would be satisfied that there is ‘sufficient certainty’ that a contingent debt will become a legally due debt at a temporally proximate point.

The decision is consistent with Australian and United Kingdom authorities such that debts may encompass both present and contingent debts. This decision will be relevant when assessing whether a company’s debt is due or not when considering unfair preference claims in New Zealand. It may also be considered by the Australian Court’s in assessing whether a company is insolvent or not. 

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