Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

New Zealand and Australian voluntary administration law

New Zealand adopted Australia’s Part 5.3A voluntary administration regime some years ago, in Part 15A of its Companies Act 1993. The NZ High Court has recently noted the relevance of Australian law in interpreting its voluntary administration provisions.

In Meltzer v Amstar New Zealand Limited [2020] NZHC 3510, administrators sought directions under section 239ADR of the Companies Act which, as the Judge noted, is taken from s 447D of the Australian Corporations Act 2001.

Section 239ADR(1) provides that an “administrator … may apply to the court for directions in relation to the performance or exercise of any of the administrator’s functions and powers”.

“Like the rest of Part 15A of the Companies Act, it is “drop-in pitch” legislation. The Australian statute has been copied almost word for word. [noting “there are some differences, including netting agreements, ipso facto clauses, and pooling orders]. In adopting Australian legislation in such a wholesale manner, Parliament must have intended to apply Australian law as part of New Zealand law. The courts should likewise use Australian judgments as guidance in applying provisions that are common to both countries. That is important in voluntary administrations. In many cases New Zealand subsidiaries are put into administration at the same time as their Australian holding companies and the administrations are run in tandem. It would be inconvenient for common provisions to be interpreted differently according to which side of the Tasman they are applied”.

That is an admirable sentiment although New Zealand courts now need to have regard to the changes made by the Australian Insolvency Law Reform Act 2016, which relevantly commenced on 1 September 2017.

New and expanded directions power under Australian law

Section 447D was repealed and is now replaced by a general provision – s 90-15 of the Insolvency Practice Schedule (Corporations) – which provides that the court may make ‘such orders as it thinks fit in relation to the external administration of a company’, including ‘an order determining any question arising in the external administration’.  Directions provisions for other insolvency administrations were likewise replaced by s 90-15.

The power under s 90-15 is wider than that under previous directions provisions, including s 447D, and allows the determination of substantive rights.

Most recently the state of Australian law was summarised by the WA Supreme Court in Re Frigger [2020] WASC 365:

“The power in s 90-15 has been held to be not limited to a power to give directions but accommodates the determination of substantive rights. In Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481 … Gleeson JA said (at [7] ‑ [8]):

The ambit of s 90-15 has not yet been fully considered in the authorities. In Reidy, Re Choice Ltd (Admin apptd) [2017] FCA 1582, Yates J at [27] accepted that an application by an administrator for directions, that formerly would have been made under s 447D(1) of the Corporations Act (now repealed), would fall within the purview of the statutory power in s 90-15 to make an order that determines a question arising in the external administration of a company”.

In Walley, Re Poles & Underground Pty Ltd (Admin apptd) [2017] FCA 486 at [41], Gleeson J remarked that the question of whether to exercise the power in s 90-15 was ‘to be answered by reference to the principles applied to the exercise of the discretions previously contained in s 479(3) and s 511 of the Act’. That may be accepted insofar as the external administrator seeks the directions of the Court, but the power under s 90-15 to ‘make such orders as it thinks fit in relation to the external administration of a company’ (s 90-15(1)) including ‘an order determining any question arising in the external administration of a company’ (s 90-15(3)(a)), is wider and accommodates the determination of substantive rights. Of course, the Court would not do so without affording potentially affected parties an opportunity to be heard: (citations omitted)”.

The power to determine substantive rights was in fact an issue in Melzer v Amstar, the High Court finding that its s 239ADR and comparable former Australian law allowed the directions in question to be given.

New Zealand court decisions generally

New Zealand court decisions are useful in themselves but also because they do make critical comment on Australian case law, unconstrained by precedent and hierarchy.  Recent examples include:

  • Timberworld v Levin [2015] NZCA 111; [2015] 3 NZLR 365 which criticised Australia’s peak indebtedness rule (the criticism was rejected in Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Bluewood Industries Pty Ltd [2020] FCA 714); and
  • Finnigan v Ellis [2017] NZCA 488; [2018] 2 NZLR 123 (which criticised Australian case law allowing examination summons to seek details of an examinee’s private financial position, for example Pitman v Park (Liquidator), in the matter of BAM Recycling Pty Ltd (in liq) [2020] FCA 887).

 

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One Response

  1. Very interesting. It is interesting to see the independence of NZ courts drawing as they do on external decisions of both UK and Australia. Sometimes they follow UK and sometimes Australia. A good example is the difference illustrated by Footes case the principles followed by HCA were not followed subsequently by UK and it was then followed by NZ

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