The first home buyer lost $2088 when the business she was buying whiteware from went into liquidation. File photo. Photo: RNZ
A customer who has been left $2000 out of pocket due to the failure of an appliance retailer says there need to be better protections for unsecured creditors.
The woman - who did not want to be identified - said she ordered a washing machine and fridge from Davies Appliances in Auckland's Silverdale in April.
She was told the fridge would be ordered from the supplier in a week and that the washing machine was in stock.
But in early June she was told neither was in stock and she would get a refund.
On 12 June, she was told that the business was going into liquidation and she would be an unsecured creditor.
"I started to find people from Google reviews, Reddit and Facebook community pages sharing similar experiences. We are all owed at least $1000 each.
Mine is $2088 - $2088 is almost one month's repayment of my mortgage. As a first-home buyer who recently got my own place and have been super broke since April, I feel so helpless and frustrated now."
She said it did not seem worth investing money in a lawyer when it was unlikely she would get anything back.
Unsecured creditors rank below secured creditors, such as banks and other lenders, staff who are owed money, and Inland Revenue.
It is only if the liquidator can realise enough money to pay all the other debts that unsecured creditors would get back any of what they are owed.
Derek Ah Sam, a consultant at Rodgers Reidy, has been appointed liquidator for Davies Appliances and said there were about 10 customers affected.
Davies Appliances has been approached for comment.
The purchaser said she thought there should be a way to give more protection to unsecured creditors.
"Registering a business only costs $200 - there's no restriction about it, even the directors can start a new business. Even I can do that, it's so unfair. Now I think I won't go to any of those small businesses… as a customer I won't trust them any more."
Steven Moe, partner at ParryField Lawyers, said he saw many people who were not aware they did not have automatic protection if a business went under.
"It can be upsetting for them, particularly if they are unsecured and don't have protection that might have been possible to obtain."
He said in some cases, people dealing with a business could register a security interest with the Personal Property Securities Register.
This would usually work best in situations where a unique item could be identified - such as a serial number on a swimming pool or a specific appliance.
"The key is education and if there is a perception that a company can fail but a person will still receive the goods or services they paid for, then that needs to be corrected.
"While there are usually disclaimers in contracts it is perhaps something that needs to be put up front so that people can know what they are getting in to.
In other contexts it might be important to negotiate stages so that you only pay on delivery rather than paying everything up front and running the risk that the company goes under."
Keaton Pronk, a licensed insolvency practitioner at McDonald Vague said the safest option when purchasing goods was to collect them immediately upon making payment.
He said that was particularly the case when a shop was advertising a closing down sale.
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