Over the last week I received two emails, regrettably there were many, many more to also contend with, but these two were of particular interest comparatively.
The first was from Peter Gosnell, journalist, who has his eye on the insolvency profession nationally, and publisher of Insolvency News Online. The email contained an invite to read his article entitled “ASIC Levy Carries Loan Shark-Level Arrears Rate” that is an excellent read about the “user pays” system that has been applied to the insolvency industry. It is a particularly well written piece. I commend the read.
The issue for me though is not the levy, as it has been widely published that the industry is well less than enamoured with its design and operation and there is no point in restating old news here. The issue that is relevant is the relationship between the content of this communication and the other.
Whilst many people facing insolvency do so in great fear and trepidation and endeavouring to overcome the sense of failure; alas there are certainly those out there who have a predetermined intent to beat the system. In these cases one of the most common problems encountered by liquidators is that the assets of an entity can mystically disappear from the company up to minutes before its insolvency, either without trace or with very little paid for them. The system we have at the moment is not practically geared for the recovery of such items without potentially great cost and the unnecessary exposure to adverse cost orders.
So now to the other email. The other email was from Michael Murray, a respected lawyer within the insolvency field, drawing my attention to legislative changes that the New Zealand Government had made to their insolvency legislation as it relates to this very topic.
The changes effectively seeking to recover inappropriately removed assets, technically referred to as voidable dispositions, can file a notice with the Court setting out all of the details. If there is no response from the relevant parties then after 20 working days then the disposition of assets is automatically set aside (declared invalid). In the alternative, where the other side does respond, the matter is heard by the Court and the appropriate decision made.
This represents an amazingly practical and quick process that will truly offer the opportunity for increased returns to creditors and a potential minimisation of legal costs.
I must admit it shouldn’t surprise me as I have written previously about the comparative statistics between the two countries which confirm that New Zealand has long out-stripped Australia on returns to Creditors in insolvent estates, in an environment of significantly less regulation; e.g. for a long time liquidators did not even have to be registered. The correlation, although not academically proven, appears to be that less regulation generates greater returns! A study undertaken by the World Bank released in 2014 indicates Australia has a recovery rate of 81.3 cents in the dollar and New Zealand 83.3 cent in the dollar.
Whilst a very proud descendant of a convict who arrived in 1797 and was to ultimately set up a number of businesses, as well as being appointed a local law enforcement officer, I do wonder if we as a country are adversely impacted by those penal beginnings. Maybe treating more people as peers rather than miscreants might improve our plight; who knows?
Something to think about anyway…