Customers join forces to get Kitchen House cash back

Last updated 05:00 11/02/2013

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A bid by Kitchen House customers to retrieve their deposits from the failed firm has taken a step closer after a Wellington couple shared their frustrations with the 18-month receivership process.

Andy Morse and his partner paid a 20 per cent deposit on a $13,000 kitchen to Kitchen House. Now the second receivers have gone to court seeking to unlock customers' deposits to pay to the appointing creditors.

Since The Dominion Post published Morse's story on Tuesday a deluge of former customers have come forward to form a group that will push to get their money back.

Their plight has even attracted offers of free legal representation, advice from a liquidator, and messages of support from former staff members.

At the heart of the case is a fund worth $177,876 made up of customer deposits that was set aside when Kitchen House was put into receivership in early 2012.

That money remained untouched when HSBC, as first secured creditor, claimed the almost $200,000 it was owed from the sale of the firm's assets.

Now second receiver Anthony Harris, acting for former owners Brian and Walter Smaill (who are also second-ranked creditors), is asking the High Court in Auckland to rule whether he can pay these funds to his clients.

Dafydd Malcolm, of MDR Legal Limited, says he's taken on the case as the odds can seem stacked against average people in a receivership, particularly in a case perceived from the outside as a "money-go-round".

He is looking to prove the fund always belonged to customers and was never part of the general pool of assets available to receivers.

Howard Thompson, a lawyer representing the receiver, is of the opposite view.

"What we are doing is the prudent thing to ask for directions," he said. "On the information we have, we don't consider there is a legal basis to repay customers ahead of the secured creditor but it would be unwise to draw any firm conclusions at this stage. One never knows what information a process like this may flush out."

He added it was easy for outside parties to heap "opprobrium" on the heads of secured creditors who are related parties, but their position is allowed under law and needed to encourage capital investment.

"The point is if a company can't give financiers, whether they be banks, lending institutions or related parties, security, it makes it difficult for the company to raise capital," he said.

Morse said he was realistic about the outcome, but he wanted to fight a process that did not seem fair.

The case is expected to go before the High Court in March.

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