Decided 12 June 1992 End date June 12, 1992 | Citation(s) [1992] 3 NZLR 528 Location New Zealand | |
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Full case name NZI Bank Ltd & Watstone Fifty Seven Ltd & DFC Financial Services Ltd & DFC New Zealand Ltd v Euro-National Corporation Ltd (First Respondent), R M Petricevic (Second Respondent), Petricevic Financial Services Limited (Third Respondent) Judge sittings Robin Cooke, Baron Cooke of Thorndon, Ivor Richardson, Thomas Gault | ||
NZI Bank Ltd v Euro-National Corp Ltd [1992] 3 NZLR 528 is a cited case in New Zealand regarding whether a contract illegal under law, can be subsequently validated under the Illegal Contracts Act 1970.
Contents
Background
The employees of Euro-National devised a complicated scheme to purchase Euro-National shares that were financed by Euro-National.
But the time under section 62(1) of the Companies Act [1955] made it illegal for a company to financially assist in the purchase of its own shares (since repealed), although there were numerous exceptions, such as financing share purchases of employees.
Whilst the Act deemed such a transaction "illegal" under the law, the Act did not expressly exclude validation as relief.
As a result, NZI sought validation of the transaction in question.
Decision
As the object of section 62(1) was to protect the interests of the shareholders and creditors of Euro-National, the court refused to grant validation. Richardson J stated "The deficiencies of the present arrangement cannot be categorized as procedural or technical. They go to the heart of the proviso".
Footnote: This case is often contrasted with Catley v Herbert, where a similar transaction that also contravened section 62(1) was validated