Tuesday 3rd September 2019
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In an unusual case, an Australian court has decided the New Zealand High Court should cooperate with its Australian counterpart and hold a joint hearing to resolve matters in the A$19 million Halifax liquidation.
The decision of the Australian Federal Court brings investors a step closer to recovering funds, and may set a new legal precedent in cross-border cooperation.
Online broker Halifax was moved into liquidation in November last year with KPMG’s Morgan Kelly, Stewart McCallum and Phil Quinlan appointed. Early estimates say 2,100 New Zealand investors will get back 85-95 cents in the dollar from trust funds and can then join unsecured creditors in the claims for the remaining money.
The ruling of Justice Jacqueline Gleeson dated Aug. 22 suggests a joint hearing, held in one location or aided through audio-video link, in order to sort out what to do with creditors' funds. The liquidators have indicated clients in both jurisdictions also want to have their say in court.
Evidence from KPMG was that 98 percent of the funds held on trust were affected by commingling.
A key question for the courts will be whether the funds should be pooled, and how to distribute them to the clients, as well as how to deal with foreign currency, and the expenses of the liquidation.
Opening the door to a joint hearing, but suggesting the liquidators talk with creditors first, Justice Gleeson said the courts should cooperate.
“This case presents as a classic case for cross-border cooperation between courts to facilitate the fair and efficient administration of the winding up of Halifax AU (and Halifax NZ) and will protect the interests of all relevant persons.”
The lawyer for the liquidators, K&L Gates partner Jason Opperman, said a New Zealand proceeding had not yet been filed, and it was not clear whether it could be heard in court or determined on the papers.
Kensington Swan partner James McMillan said while it is not unusual for overseas liquidators to seek the assistance of New Zealand courts, it was different for Australia and New Zealand judges to sit together to hear applications.
However, the New Zealand Insolvency (Cross-border) Act 2006 had given wide powers to New Zealand courts to help foreign insolvency proceedings.
“The New Zealand High Court has demonstrated a willingness to cooperate with and assist overseas courts in respect of insolvency matters,” McMillan said.
Buddle Findlay partner David Broadmore said a joint hearing seems to make sense as New Zealand courts give assistance to foreign courts in most jurisdictions.
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