Background
AIC was a finance company that collapsed in 1986. National Mutual were the trustees for the secured debentured holders. However, briefly between 30 May - 17 July 1986, AIC had not registered with the companies office its new prospectus (no. 3), which was a breach of section 37 of the Securities Act 1978. This technical oversight left the 38 investors that invested $820,000 during this period being unsecured creditors when the company was placed intoHeld
The Court of Appeal again refused validation, as the Securities Act expressly prohibited validation. Richardson J said " ection7 cannot be employed to negate the effect of a provision of the Securities Act. That would be inconsistent with the protection afforded by s 4. It follows that an allotment which is invalid under s 37(4) cannot be validated under s 7." However, as the Securities Act only prohibited validation, and not any other forms of relief, the court granted relief in the form of damages, which was similar to if validation had been granted, effectively granting validation via the back door.References
Court of Appeal of New Zealand cases New Zealand contract case law 1989 in New Zealand law 1989 in case law {{NewZealand-case-law-stub