In the Matter of Halifax Investment Services Pty Ltd (in liquidation) (No 5) [2019] FCA 1341

The Federal Court of Australia considered that it could make a request to the New Zealand High Court that there be a joint hearing in respect of applications relating to the pooling of funds held by companies in liquidation in each of Australia and New Zealand.


Halifax Investment Services Pty Ltd (‘Halifax AU’), an Australian registered company, provided broking and investment services. It owned 70% of the shares in Halifax New Zealand Limited (‘Halifax NZ’), a New Zealand company acting primarily as an introducing broker to Halifax AU. In November 2018, liquidators were appointed to Halifax AU in Australia and Halifax NZ in New Zealand.

Both Halifax AU and Halifax NZ held client funds on trust in which the liquidators identified a deficiency of AU$19 million. Additionally, substantial commingling (investigations by the liquidators indicated 98%) of those client funds was found between the various investment platforms and between Halifax AU and Halifax NZ. The investigations also revealed that the companies had transferred funds between their own and each other’s accounts on an ‘as needs’ basis to ensure there were sufficient funds for operational requirements. It was therefore not practically feasible to trace client deposits and identify the total proportion of the deficiency attributable to each client.

The liquidators sought judicial advice from the Federal Court of Australia (‘FCA’) to themselves and Halifax AU, as trustee of the client funds, in respect of the distribution of the funds. A parallel application to the New Zealand High Court (‘NZHC’) with Halifax NZ as trustee of the funds held in New Zealand, was proposed. However the liquidators argued that, due to the commingling of funds, it was not feasible for the two applications to be dealt with separately. They therefore sought an issue by the FCA of a letter of request seeking that the NZHC act in aid of and auxiliary to the FCA in respect of this matter so that the two applications could be heard jointly.  

The Decision

The FCA identified the three key issues that arise on an application to issue a letter of request which had been raised in an earlier decision on the exercise of an analogous power in s.29 Bankruptcy Act 1966. Firstly, the FCA must have power to issue the letter; secondly, the NZHC must have power to act on it; and thirdly, the power must be exercised with regard to considerations of utility and comity.

The FCA’s power to issue arose under s.581(4) Corporations Act 2001 (Cth) under which three elements needed to be satisfied. The first two were easily satisfied as NZHC was a court in another country with jurisdiction in ‘external administration matters’ under s.12 Senior Courts Act 2016 (NZ) and the liquidators’ claims were an external administration matter. The third element was more difficult to satisfy as the request needed to be to act in aid of, and be auxiliary to, the FCA in relation to the external administration matter and it was unclear how broad this was. However, the Court held that the proposed letter would be a request to act in aid of, and be auxiliary to the FCA particularly in respect of the pooling of the funds as this would affect the New Zealand bank accounts held in Halifax NZ’s name and because it would prevent there being an issue over the recognition of a decision by the FCA in New Zealand in respect of Halifax NZ’s accounts.

The liquidators also pointed to the fact that there was nothing radical about a joint hearing and that it should be encouraged particularly in light of Article 27(e) of the Model Law which contemplates the coordination of concurrent proceedings.

The FCA held that the NZHC did have power to act on the letter pursuant to s.8 Insolvency (Cross Border) Act 2006 (NZ). This was on the basis that the request for aid by the FCA would satisfy the requirements of s.8(2) and that in those circumstances, s.8(2) provided that the NZHC ‘may, if it thinks fit, act in aid of and be auxiliary to that court in relation to that insolvency proceeding’.

The FCA therefore concluded that they could issue the letter of request. 

However, when considering the third of the three key issues, whilst the FCA was happy that the letter of request drew no concerns in respect of comity, it did draw attention to the fact that the application had been made ex parte and that the representative respondents were yet to be identified. It was held that the respondents should be identified, the issues defined, and the respondents’ views sought as to the way to proceed the case before any formal issue could be made to the NZHC. This would enable them to identify precisely what respects they would ask the NZHC to act in aid of and auxiliary to the FCA. The liquidators were free to make a further request to issue the letter of request in due course.

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