Huhtamaki in New Zealand should be paid ahead of the bank by receivers of Australian pet food manufacturer Lovitt's, rules Court of Appeal in New Zealand; Huhtamaki says it is owed AU$280,000

Bdebbie Garcia

LOS ANGELES , December 8, 2011 (Industry Intelligence) – In a court decision clarifying where a supplier stands in the lineup of creditors owed by a receiver, New Zealand’s Court of Appeal ruled in favor of Finland-based packaging company Huhtamaki Oyj, reported Stuff.co.nz on Dec. 8.

Huhtamaki claims it is owed AU$280,000 (US$285,144) for ongoing packaging orders from receiver Deloitte for Lovitt’s Pty. Ltd., an Australia-based manufacturer of pet foods.

The dispute began when Deloitte said there were no funds to pay Huhtamaki and that Huhtamaki had signed an agreement indicating that the receiver’s liability was limited to the available assets of Lovitt’s, Stuff.co.nz reported.

Deloitte argued in the High Court that there were no assets remaining after paying the secured creditor Westpac Bank. The March 2010 sale of Lovitt’s for $3.1 million did not generate enough to pay the $10 million owed to Westpac.

Last week’s decision by the Court of Appeal clarifies the situation, with the court indicating that receivers should pay their bills from whatever assets the company has and that this takes precedence over what is owed to the bank.

The post-receivership supplier is not protected by law, reported Stuff.co.nz.

The court indicated that it wasn’t clear on what Deloitte meant by “available assets,” and the case has been sent back to the High Court to determine the amount of available assets and how this should be calculated.

The Court of Appeal also indicated that the documentation that the receiver provided to Huhtamaki was “muddled” and “by no means clear-cut.” Stuff.co.nz reported.

The receiver complained about the quality of some of the packaging and indicated that the final order was not delivered but instead suspended.

The dispute between Deloitte and Huhtamaki was “unusual,” said Chapman Tripp partner Michael Arthur. He called the court’s decision “fair and reasonable” regarding making suppliers’ charges “an expense of the receivership.”

Suppliers that consider dealing with companies in receivership should ensure that the terms of trade are understood ahead of time, Arthur said, reported Stuff.co.nz.

Huhtamaki Group is a global manufacturer of consumer and specialty packaging such as paper cups, molded fiber, flexible packaging and films, with 2010 net sales totaling €2 billion (US$2.66 billion), according to its website.

The primary source of this article is Stuff.co.nz, Wellington, New Zealand, on Dec. 8, 2011.

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