A Free Access Website

Michael Murray’s on-going commentary on issues in corporate and personal insolvency law and related policy and law reform, in Australia and internationally. Given the scope of insolvency, this extends to business, consumer and professional conduct, and ethics, governance and regulation, criminal, tax, environmental and administrative law, and the courts and government.

 

Halifax – a cross-border insolvency

A joint hearing of Australian and New Zealand courts is one way to deal with an intermingled cross-Tasman insolvency, through a letter of request process, but other options might have been available through the Model Law.

Whichever way, the winding up will be expensive, as recent fee approvals reveal.

“Classic candidate for cross-border cooperation”

On 22 August 2019, the Federal Court decided in principle that it could send a letter of request to the New Zealand High Court requesting a joint hearing on liquidators’ pooling applications of funds held by insolvent companies in Australia and New Zealand. The Court described it as a “classic candidate for cross-border cooperation between courts to facilitate the fair and efficient administration of the winding up. The ‘letter of request’ would be issued by the FCA to the NZHC pursuant to section 581 of the Corporations Act.  

The funds of the two related companies – Halifax AU and Halifax NZ – had become extensively comingled but it was not feasible for the pooling orders to be determined separately by the FCA and the NZHC.

This is the first time that an Australian court has considered, and approved, at least in principle, the concept of a joint court hearing with a court of another jurisdiction in an insolvency context. Globally there is some precedent for this with the joint hearings of US and Canadian courts in the complex bankruptcy of the Nortel group, but this is new ground in Australia.

Another approach?

While the case demonstrates the ongoing relevance of section 581 of the Corporations Act despite the adoption of the Model Law on Cross-Border Insolvency, in a forthcoming article in the Insolvency Law Bulletin,[1] authors query the view that Halifax AU and Halifax NZ were separate corporate entities, and that the Model Law is only intended to provide assistance in cross-border insolvency matters relating to the one entity.

The authors say that while the Model Law is primarily focused on “multiple proceedings concerning a single debtor”, it does not necessarily follow that the scope of relief or assistance should be drawn narrowly to exclude all circumstances involving multiple debtors.

They suggest that an alternative approach of joint recognition in New Zealand and Australia of their liquidations as foreign main proceedings under the Model Law could have been used, giving rise to the availability of potential relief under articles 20 and 21 of the Model Law.

Next hearing

In any event, and in the meantime, the liquidators say they filed proceedings in the NZ High Court on 25 September 2019 although the outcome is not stated.

Fees

The matter has involved a lot of work.  Justice Gleeson of the Federal Court has fixed the remuneration of the liquidators as administrators of Halifax in the amount of $1,700,889; and as liquidators for the period 20 March to 31 August 2019 in the amount of $1,096,380.

All up $2.8 million or so.

More soon.

 

 

 

[1] [2019] Insolvency Law Bulletin, Classic cross-border cooperation: joint court hearings in the Halifax insolvency. Editors of the Bulletin are Anil Hargovan and Michael Murray.

Share on facebook
Share on google
Share on twitter
Share on linkedin

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest

Popular

Featured

Stay Up To Date With Murrays Legal Commentary

Subscribe now