Bridging Troubled Waters: Trans-Tasman Insolvency Law with Associate Professor David Brown | Insolvency | Bankruptcy

Bridging Troubled Waters

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Trans-Tasman Insolvency Law with Associate Professor David Brown

David Brown is an Associate Professor in the University of Adelaide Law School, with particular expertise in insolvency (or bankruptcy), land law, the law as it relates to personal property, and Trans-Tasman law. David’s full list of interests, publications and professional associations can be found at the University of Adelaide Staff Profile website. The path to Adelaide David is English born and studied law at Merton College Oxford. He taught law at the universities of Oxford and Birmingham in England, later at the Victoria University of Wellington in New Zealand and now at the University of Adelaide. Alongside this, he has worked as an insolvency lawyer for leading solicitors firms in London, most recently as a consultant. Why the move Down Under? In 1996, David moved to Wellington, New Zealand, excited by a work opportunity that opened up in one of David’s area of expertise as a commercial lawyer – insolvency law. New Zealand was embarking on a big reform of their insolvency law, basing it on English law which clearly suited him. “I thought that would be an exciting time to be in New Zealand where they are starting afresh and looking at the whole law.” At that time, he had just finished a book mostly about English law, called Corporate Rescue. He sent a copy and a letter of introduction to the main players in the area of insolvency in New Zealand – a judge, a key civil servant working on this reform process, some lawyers, barristers and solicitors. The judge reviewed the book for the New Zealand Law Journal, saying that "It’s a great book, but there’s hardly anything about New Zealand in it so I don’t recommend you buy it unless you want to learn about why we should have this law." Nevertheless the book became a timely door opener. Later, David was asked to do a review of corporate rescue that was put on the government website and sent to stakeholders. “I put the options to them. I did a review of what is happening in the rest of the world. I said it’s a nobrainer that you should have what the Australians have got because you’re next door, but actually I think the Canadian system is better.” Subsequently, David was appointed to the Law Commission’s advisory group and also to the relevant Law Society Committee, the Joint Insolvency Committee (a committee of the Law Society and the New Zealand Chartered Accountants). “I had three bites at the cherry by criticising the reform process which I had helped to draft, from two angles. “My main achievement in New Zealand was my contribution to the new insolvency law. I also worked quite closely with the parliamentary draftspeople in drafting the law. Ultimately what was introduced was based on the Australian system, definitely in terms of corporate rescue.” David says.

So what is corporate rescue? When a company gets into such a state of financial stress that it cannot pay its debts, it may be forced to consider the option of insolvency procedures. Liquidation is the traditional ‘end of the road’ procedure, but it is usually undesirable for a number of reasons. If liquidation is preventable and the business able to be rescued, jobs are saved and the business continues, (an ongoing business is worth more than a bankrupt business). This outcome is ideal if the business is still viable but happened to hit a difficult period, for example, an outside factor such as the global financial crisis was the main cause of them going bust. Corporate rescue is the term used to describe the process to try to prevent liquidation. “Often, corporate rescue does not succeed and the company ultimately goes into liquidation, but it does provide a last chance to see if the company can be saved.” David looks at the options for a company getting into difficulty, and in particular, what can be done to prevent it. Furthermore, should anything be done to prevent it? In those cases where something should be done, what are the legal structures that we need to facilitate? Key people involved in insolvency are lawyers, accountants and bankers so while David is an academic, he is very involved with the professions, particularly in this area. “This is what the university would call outreach or community engagement, in other words, I spend quite a bit of time engaging with these professions in this area in which I research.”

Coming to Adelaide David came to Adelaide in 2009, at a time when a new area of law called the Personal Property Securities Act (PPSA) was being drafted. David refers to this Act as “one of the most important pieces of commercial law that we have had in this country for decades”. The PPSA represents a significant change in the way security transactions happen, particularly for businesses. It essentially gives businesses greater protection over assets, as well as simplifying a complex system that differs across the states and territories. As of 30 January 2012 it becomes one national system with a single register. The multinational perspective Clearly David’s expertise encompasses the legal systems of several countries, particularly Australia, England and New Zealand. “A lot of my work is comparative, looking at what is done in other jurisdictions.” says David. It is important in the area of law to see what is happening in the rest of the world, and how we can learn and sometimes copy from the best laws. Furthermore, "International bodies also make so-called ‘soft law’. These laws may not be the law in Australia, but international agreements (produced by bodies such as the United Nations) provide Australia with guides or standards of the best practice. International best practice standards may be enshrined in local Australian law or may just act as a guide.” The other main area of David’s work at the University of Adelaide is Trans-Tasman law, particularly legal relationships between Australia and New Zealand with a focus on commercial law.

Australia and New Zealand signed a memorandum of understanding in 2006, setting where they can harmonise Australian and New Zealand law. As the two countries are close trading partners, (the first Closer Economic Relations free trade agreement was signed by the two governments in 1983), this step is common sense. Commercial law includes insolvency, banking law, competition law, international trade, intellectual property, securities law, shares, and the stock exchange. “I spend a lot of time looking at these issues and I am excited by the prospect that one day I could do more. I want to organise a conference on Trans-Tasman law. I’m in a good position to do that as I am involved in cross-border insolvency, looking at companies that go bust with international impact. Australia and New Zealand are trying to get agreement with how to deal with those cases. A recent example is Borders, which had bookshops both in Australia and New Zealand. They employed the same company in both countries to run the insolvency. There were some issues because the law is similar but not the same. “I was appointed by both the Australian and New Zealand governments to their advisory panels. We are looking at ways to make the law more harmonised, maybe have a treaty between the two countries so that it is a lot easier if you have a business in trouble.” David also gives an example of a company in say New Zealand that was involved in fraudulent activity, which resulted in investors losing their money. Trans-Tasman law would deal with the possibility of the directors then coming to Australia and setting up and doing the same thing. “This is the sort of thing we want to make easier to deal with.” And finally – Bankruptcy and Insolvency Law Scholarship Unit (BILS)! Another workstream occupying David is the Bankruptcy and Insolvency Law Scholarship Unit (BILS) blog he writes with Associate Professor Christopher Symes, also with the University of Adelaide Law School. “In the BILS blog we contribute to important issues in this area of law. Recently we have written about the Australian Securities and Investment Comission (ASIC), and their lack of contribution to regulation of insolvency - particularly regulating the people who come in and liquidate a company. We think ASIC is not devoting enough focus or resources to that, because you do get cowboys in the industry. “I’ve also had a campaign about a company which was selling erectile dysfunction products. The company went into an insolvency proceeding to avoid litigation from the Australian Competition and Consumer Commission (ACCC) who complained about the company misleading customers through making false claims about the product. The people running the insolvency did not tell the public that this company was in insolvency, so customers carried on signing up, even though the company and its insolvency people knew that the company wouldn’t be able to supply the treatment because it was going bust. There’s been some court cases, I’ve blogged about that quite a bit. BILS is an important project for David and Christopher and they intend to increase its reach and impact. “We have just started to get off the ground. It has been a big thing for us."

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