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Nelson man Darryl McQuade paid $3800 towards a $7600 spa mid-August.
Over the following week he prepared his yard, excavating and sealing much of it, ready to collect the spa on September 5.
But by the end of August, the outdoor living goods retailer he bought the spa from, Nelson-based Retail Links Ltd (trading as 4 Seasons), had gone into receivership.
“Get my first email about the receivership Monday (September 4), saying I won’t be receiving my spa or my deposit back, even though it’s just sitting there and I was ready to pay [the] remaining 50% when I picked it up.”
Katy Jones/Stuff
Two hundred to 300 people nationwide are waiting to receive orders including spas from outdoor living goods retailer, 4 Seasons, before it’s Nelson based holding company, Retail Links Ltd, went into receivership three weeks ago.
4 Seasons went into receivership on August 30, after directors passed a special resolution asking the Bank of New Zealand to appoint receivers.
The company, with five stores nationwide, owed creditors an estimated $8.5 million.
Receiver Richard Nacey from PWC said there were no funds in the company’s bank account when receivers were appointed.
About half of the company’s debt was owed to secured creditors, including the Bank of New Zealand and IRD, who would be paid any money before unsecured creditors.
McQuade – an unsecured creditor – held out little hope of getting any of the money back, and bought a spa elsewhere, which cost $9000.
He was annoyed the 4 Seasons spa he put a deposit on could be on-sold.
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Goods the company had in stock were being sold by receivers at the retailer’s stores and online.
A couple who bought a fireplace from 4 Seasons New Plymouth for $3500 felt they had “essentially gifted 4 Seasons $3500 to pay down their debts.”
A customer in Nelson was angry he had to pay nearly half the price again for a table and benches he had paid for in full.
The man bought the furniture for just over $3000, on August 27, and said staff told him it was ready to be picked up on August 30.
After receivers were appointed on that date, he was asked to pay an extra $1100 for the goods.
CHRISTEL YARDLEY/STUFF/Waikato Times
4 Seasons stores have re-opened after receivers temporarily closed them to complete a stocktake.
A staff member said other people had paid a “discount” price for items they bought outright before receivership – with one customer paying $29,000 for a swim spa worth around $40,000.
How can this happen?
Customers who paid deposits were unsecured creditors under insolvency legislation, ranking behind creditors such as the bank, which had security.
Unsecured creditors often ended up receiving little or nothing, because there often wasn’t enough money to go around when a company was in receivership or liquidation.
Law experts said items paid for in full could still legally belong to the company.
Liz McDonald/Stuff
Liquidations have been hitting businesses across the country.
Where 4 Seasons customers had paid for orders in full, receivers were “working through the position in respect to each customer to determine whether title [ownership] has passed”, Nacey said.
“Where title hasn’t passed to the customer, those goods [paid for with deposits or in full] remain the property of Retail Links Limited, and will be realised in order to pay creditors in accordance with the statutory order of priority outlined in the Companies Act,” he said.
Senior lecturer in commercial law at University of Auckland, Michael Josling, said property (title) could pass when buyers hadn’t paid anything at all – like a credit sale.
CHRISTEL YARDLEY/STUFF/Waikato Times
Nelson man Darryl McQuade paid $3800 towards a spa from outdoor living goods company, Retail Links Limited, trading as 4 Seasons, in August. Two weeks later, the retailer went into receivership, meaning he couldn’t collect the spa as planned, and now had an unsecured claim against the company – with such claimants often left out of pocket.
The rules which set out when property passed were contained in the Contract and Commercial Law Act, he said.
“Generally the goods have to be appropriated to the individual person.
“It may be enough for example, if they [vendors] just put it aside and say this belongs to such and such.”
Property was unlikely to have passed to someone once they bought something online from lots of products in a warehouse, Josling said.
“The ultimate test” was the intention of both parties, he said.
Little protection for consumers when a company becomes insolvent
Consumers could put clauses in sales contracts to protect themselves against losing money if a company went bust, Josling said.
“For example that your money is held on trust, also just cash on delivery, things like that.
“But it’s kind of complicated, and I doubt if a standard retailer would agree to draft a contract to protect you.”
Braden Fastier/Nelson Mail
In recent months, there have been a number of stories about companies going bust and taking customer deposits with them
If directors or salespeople were dishonest, customers may have a personal action against them, for breach of the Fair Trading Act, for example, he said.
Where a business went into liquidation shortly after accepting deposits then this may indicate that the directors had not met their obligations under the Companies Act, he said.
Internationally, the trend over the last few decades had been to require something like voluntary administration, rather than receiverships.
“Instead of saying the bank gets everything … they set aside a certain proportion for unsecured creditors.”
Consumer NZ advised consumers to try to keep deposits as small as possible, and always hang onto receipts.
Those who paid by credit or debit card could talk to their bank to see if they could get a chargeback.
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