Morgan Williams Ltd (MWL) is a long-established department store in central Wellington and was for many years highly profitable. One way in which it rewarded its directors was to employ their children, who were students, over the summer break. The company paid these student-employees wages far in excess of market rates.

In recent years, MWL became heavily reliant on cruise ship passengers to maintain its business. Due to the Covid 19 pandemic, the last cruise ship visited in March 2020. MWL was slow to develop an online presence. Also, many people, whose offices are in central Wellington, started to work from home.

By June 2020, MWL's sales were down by 90%, and by September 2020, MWL was in serious financial difficulty. December is usually MWL's best month for sales, but December 2020 was a disaster and the company started to lay off staff. In March 2021, MWL failed to pay its GST and other tax liabilities. Southpac, the company's bank, threatened to seize MWL's stock, in terms of a general security agreement. On 1 June 2021, on the advice of the board of directors, MWL's shareholders vote unanimously to put the company into liquidation.

(a) Place the following creditors in the order of payment on liquidation

1. Southpac, which holds a security interest in all of MWL's present and after acquired property;
2. The liquidator for their fees;
3. IRD for employees' KiwiSaver contributions, which MWL had not transferred;
4. IRD for MWL's unpaid GST;
5. Customers who bought goods on lay-by.

(b) Between December 2019 and February 2020, MWL paid Zak Gorse $50,000 to work as a shop assistant. (Zak's mother was director of human resources at MWL.)

Explain whether the liquidator may recover any amount from Zak.

Companies act 1993 New Zealand