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.
“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.
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, 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.
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.
The matter has involved extensive and complex 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.
The Judge noted that the work performed was
‘very complex involving, as it does, very large sums of money, multiple bank accounts, commingled trust funds and a large number of investors. The requirement to determine entitlements to commingled trust funds held by two related entities in different jurisdictions is arguably a requirement to deal with an extraordinary issue’.
Justice Gleeson also noted that the liquidators had not been paid any remuneration or any amount on account of expenses (principally debts to solicitors and counsel) in respect of work performed, either as administrators or liquidators of the company, pending the court’s approval.
See Kelly, in the matter of Halifax Investment Services Pty Ltd (in liq) (No 6)  FCA 2111
The matter is next in court on 18 December 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.