The Court of Appeal declared that David Ross Petterson, a forensic accountant and insolvency practitioner from Levin, New Zealand, is not entitled to an indemnity concerning the costs and disbursements incurred in legal proceedings in the Supreme Court and the Court of Appeal.

The decision delivered last Friday marks a significant precedent in insolvency litigation.

The matter involved Petterson, the appellant, and Chan Mow and Company Limited (CML), the major creditor of Progressive Insurance Company Limited (Progressive), which is currently in liquidation. 

The second respondent, Progressive Insurance, has been under scrutiny due to questionable operations led by its former controller, Murray Drake. Petterson was appointed as the liquidator of Progressive by Drake, raising concerns due to Petterson's prior professional associations with Drake and his family.

The Chief Justice ordered Petterson’s removal as liquidator on 21 April 2023, following an application by CML. Petterson appealed this decision, but the Court of Appeal dismissed his appeal on 28 November 2023. The key issues addressed included the appellant’s remuneration and his conduct during the liquidation process.

Justice Fisher, Justice Blanchard, and Justice Young presided over the appellate hearing on 22 November 2023. The court’s judgment detailed several instances where Petterson’s actions were deemed questionable, particularly his insistence on remaining in office despite evident conflicts of interest and a lack of transparency in his dealings.

The court ordered Petterson to pay substantial costs and disbursements. Specifically, the orders included: For Supreme Court proceedings: NZ$89,333 and WST 52,382.62 in costs, and disbursements of NZ$15,283.69 and WST 873.60.

For the Court of Appeal proceedings: NZ$85,971.47 and WST 12,150 in costs, and disbursements of NZ$5,592.42 and WST 873.60.

The court found that Petterson's resistance to his removal was neither honest nor reasonable, noting his failure to disclose material relationships and his conduct that appeared biased in favour of Drake and against CML.

The court was critical of Petterson’s conduct, citing a marked lack of transparency and an unreasonable defence against his removal. 

It highlighted that Petterson’s continued resistance, even after adverse findings seemed inevitable, exacerbated the situation. The decision emphasised that liquidators must balance their fiduciary duties with transparency and unbiased judgment, especially when their appointment and actions are contested. 

While the judgment addressed the immediate issue of costs, it also touched on the appellant’s pending remuneration claims. On March 13, 2024, Petterson invoiced the current liquidators of Progressive for NZ$113,626.42, which was subsequently rejected. The Court indicated that any further disputes regarding his remuneration would be addressed in the Supreme Court.