“with all due respect an exceptionally opaque process in changing important aspects of company law”

A judge is very critical of the “Henry VIII” process by which the commencement date of the Insolvency Law Reform Act 2016 has been deferred.

As Justice Robb, of the NSW Supreme Court explains, Part 10.25 of the Corporations Regulations was inserted by reg 4 and sch 11 of the Corporations and Other Legislation Amendment (Insolvency Law Reform) Regulation 2016.

Part 10.25 contains transitional provisions relating to the Insolvency Practice Schedule (Corporations). That Schedule contains provisions that will govern various aspects of the insolvency of corporations when it commences on 1 September 2017.

Justice Robb said:

“This series of statutory and regulatory provisions effects in my view and with all due respect an exceptionally opaque process in changing important aspects of company law. [He refers to a helpful note in Butterworths Corporation Law Bulletin 11, by Thomas Gardner].

On what basis can it rationally be expected that competent company lawyers, let alone members of the public, will readily understand how these and many other significant changes to company law will take effect?”

The Judge refers to the fact that if one looks now for ss 479 and 542 and other sections of the Corporations Act in the Federal Register of Legislation, or Austlii, those sections will not be found. They have been deleted as if repealed. They are repealed, but their repeal is deferred by the operation of a regulation authorised by a section of the Act.

Justice Robb refers to recent matters before the Court where applications were made under existing sections of the Act but the applications were amended to claim the same relief under relevant provisions of the new law, before it was then appreciated that the amendment was premature and unnecessary. He gives an example of Re Keystone Group Holdings Pty Ltd (Receivers & Managers Appointed) (Administrators Appointed) [2017] NSWSC 454, where Gleeson JA dealt at [5] with an incorrect submission made by the administrators that s 437B of the Corporations Act had been repealed with effect from 1 March 2017.

As Justice Robb says,

“the confusion in these cases was not suffered by practitioners who lacked competence in company law”.

See Glengrant Civil Pty Ltd (in liq) [2017] NSWSC 843

Comment

Henry VIII clauses

The part deferral of the Insolvency Law Reform Act was effected by what is known as a “Henry VIII clause”, the use of delegated or subordinate law to change substantive law, the popular name of which indicates, from history, that it must be used with caution by drafters.

Give the pedigree of Henry VIII clauses, concern about their use was alleviated by the High Court in ADCO Constructions Pty Limited v Goudappel [2014] HCA 18. This is the subject of useful comment in AGS Express Law, High Court upholds the validity of ‘Henry VIII’ regulation affecting an accrued right to compensation, 21 May 2014.

Any concern is further dissipated by the fact that delegated power is often used to amend monetary limits in UK Acts of Parliament, and that such mechanisms are being applied extensively by the UK government in exiting, legally, from Brexit.

We should all be clear now

Company lawyers, insolvency practitioners and judges should now be clear about what starts on 1 September, and what powers and duties practitioners have had since 1 March, and should be using, and what powers the regulators and the courts likewise have.

There are about 50 business days until the new law starts, on 1 September, to apply this knowledge correctly. 

And also about the transitional provisions

But then, after that, account has to be taken of the on-going transitional provisions in the Insolvency Law Reform Act.