• Introducing the New Zealand Justice Forum

    The New Zealand Justice Forum aims to pool the collective experiences of our citizens, lawyers, and academics in order to discuss the many defects that weaken the integrity of the legal system.
  • Claim on deposit shocks couple

    A Wellington couple are infuriated and shocked the second receiver of the failed kitchen supplier Kitchen House is looking to claim customer deposits worth $177,876 for the former owners of the firm. Andy Morse and partner Rowan White paid a 20 per cent deposit on a $13,000 kitchen in October 2011 to the Kitchen House as part of renovation project on their Brooklyn home.

    However, the six-store chain, run by CGKH Ltd, collapsed not long after and was placed in receivership.
    The sale of the firm's assets by KordaMentha settled the $195,000 owed to first-tier creditor HSBC, and met other expenses such as wages, but was not enough to pay the firm's remaining debts.
    At the time the couple's deposit, along with those from more than 50 other customers, was held in a separate fund and left untouched by the initial receivership process.

    However, the second receiver Antony Harris applied to the High Court at Auckland just before Christmas to authorise him to pay the fund to his appointing creditors, trusts Brisma Ltd and Walsma Ltd. The trusts are owned by brothers Brian and Walter Smaill, and the trusts owned CGKH. In turn they are owed more than $1 million by CGKH as second-ranked creditors. If Harris is successful, Morse and White could be out of pocket by $2630, plus the extra $2000 they had to pay for a more expensive kitchen from an alternative supplier.

    "It's infuriating," Morse said. "It's shocking to find that out and disappointing." The court ruling will revolve around whether funds were initially set aside to protect them in a trust, or if they were in fact pre-payments to be used as working capital. Howard Thompson, a partner at McMahon Butterworth Thompson who is acting for Harris, is of the opinion the contract terms favour the payment view. "What we can make out is that it was payment upfront, and it was the company's money when it was paid," Thomson said. That would rank customers as unsecured creditors, putting them behind the partnership and a group of more than 10 other preferential creditors, effectively meaning they won't see a cent of their deposit.

    "They took the business risk and they need to pay the price for the business risk," White said.
    The couple say they plan to challenge the process, which goes before the court early next month, and are hoping to encourage other Kitchen House customers to rally to their cause. "I don't know anyone else in New Zealand in this situation, but there has got to be a lot of people in this situation," Morse said.

    So far they have spoken to the Citizens Advice Bureau and consulted the Wellington Community Law Centre, but would consider hiring a legal representative if enough people joined their group.
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