Why does the Federal Circuit Court not have corporate insolvency jurisdiction?

This is not a plug for the Federal Circuit Court of Australia, which sits below the Federal Court, but it asks why it has not been given corporate insolvency jurisdiction under the Corporations Act.  The unsatisfactory answer to that is suggested at the end of this article.

Apart from its extensive family law and child support jurisdiction, the FCC covers federal administrative law, admiralty law, bankruptcy, copyright, human rights, industrial law, migration, privacy and consumer law. It shares those jurisdictions with the Family Court and the Federal Court. Some work in those jurisdictions is also done in state and territory courts.

It claims to deal with approximately 95% of migration and bankruptcy applications filed in the federal courts.

Insolvency harmonization

Now that the government has introduced its harmonization reforms of personal and corporate insolvency, there is a logic in likewise harmonizing the courts’ jurisdictions.  The FCC will be determining matters under the Bankruptcy Schedule and Rules, which are largely harmonized with the Corporations Schedule and Rules. 

Phoenix reforms

Also, now that the government has moved on to consider law reform to deal with unlawful phoenix companies, which are largely confined to small to medium enterprises, there is sense in having the FCC assume the contemplated court powers to deal with that problem. The Federal Court tends to deal with the larger corporate and competition issues, and might properly be unburdened with many SME defendants. 

FCC’s jurisdiction

Not that the FCC does not decide upon significant corporate entities and issues. It deals with fair work matters, in particular in respect of employees, industrial disputes, consumer claims, and significant refugee, discrimination and human rights matters. It has a role, along with the superior courts, in developing the law, the recent imposition of liability on a bookkeeper for the wage paying defaults of his client being one example.  It also makes finding and imposes significant penalties for corporate and employer misconduct.

Corporate insolvency

Corporate insolvency has its difficulties, but not unduly so compared with many other areas of law. And it is a jurisdiction much of which can already be exercised by the lower courts, as “small c” courts under the Corporations Act; the Local Court of NSW, the County Court of Victoria as examples.

It would not be compulsory.  The market can be given the choice as it has now, between the Federal Court and the Supreme Courts.  The market has worked out, as an example, that 80% of bankruptcy matters are best commenced in the FCC, rather than the Federal Court.

It has been recommended to the government by a Senate committee that the FCC be given corporate jurisdiction in another problem area, that of the construction industry. The government has continued to decline this, and other such suggestions, without reasons.

The reasons?

The reasons in part may lie in human nature and the history of the courts over centuries, where that human nature is displayed.  As our recent Nobel Prize winner tells us, we value what we have, perhaps unduly so. We don’t like to give up territory to another, even if that territory be an unwanted burden. Elitism and hierarchy prevail.  Courts have fought over jurisdiction for centuries, and continue to do so nowadays, including between countries. In the context of the FCC, this is compounded in corporate insolvency by the fact that it is shared between the Federal Court and the state and territory Supreme Courts.  State government parochial interests also prevail.

In a mature democracy and judiciary, these undue human responses things still exist.  Nevertheless, there are many objective reasons why the FCC should have corporate insolvency jurisdiction, more so considering our recent harmonizing insolvency reforms and the government’s new focus on SME corporate insolvency and misconduct.

Posted by admin