Financial Markets Authority v Du Val Capital Partners Limited (in statutory management)
[2025] NZHC 655
•7 April 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2024-419-201
[2025] NZHC 655
UNDER the Financial Markets Conduct Act 2013 IN THE MATTER OF
a without notice application for asset preservation orders, orders appointing receivers, and managers and receivers, and related and incidental orders
BETWEEN
FINANCIAL MARKETS AUTHORITY
Applicant
AND
DU VAL CAPITAL PARTNERS LIMITED
(in statutory management) First Respondent
Continued …
Hearing: 18 December 2024 and further submissions received on
31 January 2025 (Applicant), 31 January 2025 (Receivers),
10 February 2025 (the Clarkes) and 17 February 2025 (Counsel assisting the Court)
Appearances:
J Cooper KC, S T Hartley and A D Gormack for Applicant M D Arthur, N D Whittle for the Receivers
C M Clarke in person (via VMR) for the Clarkes
S A Armstrong KC (Counsel assisting the Court, appointed 22 January 2025)
Judgment:
7 April 2025
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 7 April 2025 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.
………………………………
Registrar/Deputy Registrar
FINANCIAL MARKETS AUTHORITY v DU VAL CAPITAL PARTNERS LTD (in statutory management) [2025] NZHC 655 [7 April 2025]
AND DU VAL GROUP NZ LIMITED
(in statutory management) Second Respondent
DU VAL IP HOLDINGS LIMITED
Third RespondentDU VAL PROP TECH LIMITED
Fourth RespondentCOASTWAY LIMITED
Fifth Respondent
DU VAL CONNECT LIMITED PARTNERSHIP
Sixth Respondent
KARAPIRO CORPORATE TRUSTEES LIMITED
Seventh RespondentJOHN KENYON CLARKE
Eighth RespondentCHARLOTTE MARIE CLARKE
Ninth RespondentDU VAL MORTGAGE FUND LIMITED
PARTNERSHIP (in statutory management) Tenth Respondent
DU VAL OPPORTUNITY FUND LIMITED
PARTNERSHIP (in statutory management) Eleventh Respondent
DU VAL BTR GP LIMITED (in statutory management)
Twelfth Respondent
DU VAL BUILD TO RENT LIMITED
PARTNERSHIP (in statutory management) Thirteenth Respondent
DU VAL PROPERTY GROUP LIMITED
(in statutory management) Fourteenth Respondent
Continued …
DU VAL INVESTMENTS LIMITED (in
statutory management) Fifteenth Respondent
DU VAL BUILDING LIMITED (in statutory management)
Sixteenth Respondent
DU VAL LAND LIMITED (in statutory management)
Seventeenth Respondent
DU VAL PROPERTY MANAGEMENT
LIMITED (in statutory management) Eighteenth Respondent
DU VAL MANAGEMENT LIMITED
(in statutory management) Nineteenth Respondent
DU VAL GP HOLDINGS LIMITED
(in statutory management) Twentieth Respondent
AMBLE VALLEY LIMITED (in statutory management)
Twenty-First Respondent
APRIL ELEMENTS LIMITED (in statutory management)
Twenty-Second Respondent
CLARKE MEDIA GROUP LIMITED
(in statutory management) Twenty-Third Respondent
BLUE RIVER HOLDINGS LIMITED
(in statutory management) Twenty-Fourth Respondent
FLIPPING LIDS LIMITED (in statutory management)
Twenty-Fifth Respondent
TTPP GENERAL PARTNER LIMITED
(in statutory management) Twenty-Sixth Respondent
Continued …
TRANS-TASMAN PACIFIC
PARTNERSHIP LIMITED (in statutory management)
Twenty-Seventh Respondent
IPM GENERAL PARTNER LIMITED
(in statutory management) Twenty-Eighth Respondent
DIAMOND BOX LIMITED (in statutory management)
Twenty-Ninth Respondent
WOODLE LIMITED (in statutory management)
Thirtieth Respondent
DU VAL CLUBS LIMITED (in statutory management)
Thirty-First Respondent
DU VAL HC GP LIMITED
Thirty-Second Respondent
DU VAL HEALTH CLUBS LIMITED PARTNERSHIP
Thirty-Third Respondent
DU VAL CMUF GP LIMITED (in statutory management)
Thirty-Fourth Respondent
DU VAL COMMERCIAL AND MIXED- USE FUND LIMITED PARTNERSHIP
(in statutory management) Thirty-Fifth Respondent
BLUE FRAME HOLDINGS LIMITED
(in statutory management) Thirty-Sixth Respondent
DU VAL BTR LIMITED (in statutory management)
Thirty-Seventh Respondent
DU VAL CMUF LIMITED (in statutory management)
Thirty-Eighth Respondent Continued …
FARHAM LIMITED (in statutory management)
Thirty-Ninth Respondent
FIJI LAND ACQUISITION LIMITED
(in statutory management) Fortieth Respondent
SHRUB HOLDINGS LIMITED
(in statutory management) Forty-First Respondent
TE AWA TERRACES LIMITED
PARTNERSHIP (in statutory management) Forty-Second Respondent
DU VAL GP 1 LIMITED (in statutory management)
Forty-Third Respondent
DU VAL NEW HOMES LIMITED
PARTNERSHIP (in statutory management) Forty-Fourth Respondent
DU VAL GP 5 LIMITED (in statutory management)
Forty-Fifth Respondent
DU VAL GP 8 LIMITED (in statutory management)
Forty-Sixth Respondent
PARRY LIMITED PARTNERSHIP
(in statutory management) Forty-Seventh Respondent
GET STARTED LIMITED (in statutory management)
Forty-Eighth Respondent
DU VAL EDUCATION LIMITED
PARTNERSHIP (in statutory management) Forty-Ninth Respondent
ORANGE PINEAPPLE LIMITED
(in statutory management) Fiftieth Respondent
Continued …
RISING HOLDINGS LIMITED(in statutory management)
Fifty-First Respondent
TECHWAY LIMITED (in statutory management)
Fifty-Second Respondent
TRIBAL HOLDINGS LIMITED (in
statutory management) Fifty-Third Respondent
WATER ALLEY LIMITED (in statutory management)
Fifty-Fourth Respondent
DU VAL GP LIMITED (in statutory management)
Fifty-Fifth Respondent
HILLSIDE CROSSING LIMITED
PARTNERSHIP (in statutory management) Fifty-Sixth Respondent
DU VAL GP 4 LIMITED (in statutory management)
Fifty-Seventh Respondent
DU VAL DEVELOPMENT FUND NO. 14
LIMITED PARTNERSHIP (in statutory management)
Fifty-Eighth Respondent
DU VAL GP 7 LIMITED (in statutory management)
Fifty-Ninth Respondent
EARLSWORTH LIMITED PARTNERSHIP
(in statutory management) Sixtieth Respondent
DU VAL GP 9 LIMITED (in statutory management)
Sixty-First Respondent
HILL TOP APARTMENTS LIMITED
PARTNERSHIP (in statutory management) Sixty-Second Respondent
Continued …
DU VAL GP 10 LIMITED (in statutory management)
Sixty-Third Respondent
SUNNYVALE TERRACES LIMITED
PARTNERSHIP (in statutory management) Sixty-Fourth Respondent
DU VAL GP 11 LIMITED (in statutory management)
Sixty-Fifth Respondent
EDMONTON ROAD LIMITED
PARTNERSHIP (in statutory management) Sixty-Sixth Respondent
C.A.P.A.C LTD (trading as iCLAW) Sixty-Seventh Respondent
JK & CM CLARKE TRUST
Sixty-Eighth Respondent
JOHN FISK, STEPHEN WHITE and LARA
BENNETT as the receivers and receivers and managers of the Third to Ninth and Sixty-Eighth Respondents and statutory managers of the First, Second, Tenth to
Thirty-First, and 34th to 66th Respondents
CHE DESMOND
Interested Party
LINDEMAN INVESTMENT LIMITED and
47 others Interested Party
SIETSKE STOKES and ONN CHEONG
Interested Parties
Table of Contents
Para No
The issue[1]
How the issue arises: the procedural background and the
Receivers’ application[6]
Principles of interpretation[17]
Summary of submissions[18]
The text of s 523(1)(h) in the light of its context and purpose.[25]
The immediate statutory context[25]
Purposes of the FMCA[31]
Wider legislative context[33]
Australian case law[44]
Inherent jurisdiction/common law powers[55]
Inconsistency with NZBORA rights and freedoms? [67]
NZBORA[68]
Principle of legality[71]
Decision on interpretation of 523(1)(h) [84] Should orders be made giving the Receivers power to compel examination? [98] The form of the initial Preservation Orders [99]
Result and Orders[105]
The issue
[1] Unless statute imposes or authorises the imposition of a duty to the contrary, every citizen has in general a right to refuse to answer questions from anyone, including an official.1
[2] Section 523(1)(h) of the Financial Markets Conduct Act 2013 (the FMCA) provides that where it is necessary or desirable in the interests of an aggrieved person, the Court may make an order appointing receivers “having any powers that the court orders” of property or part of the property of an individual or corporate entity. 2 The test in an interim application is whether it is “desirable” to make the order.3
[3] The question I consider in this decision is whether by the words “any powers the court orders” the Court can confer on receivers the specific power to compel a person to attend on them and be examined. I refer to this in shorthand as a power of compulsory examination.
[4] I have concluded that it can. The outcome is that I make an order that Kenyon and Charlotte Clarke attend an examination by John Fisk, Stephen White and Lara Bennett (together, the Receivers) and answer questions about their assets and financial position, as well as those of the entities in receivership.
[5] The issue turns on the interpretation of s 523(1)(h) and, specifically, what implied limitations there are in the words “any powers the court orders” within s 523(1)(h).
How the issue arises: the procedural background and the Receivers’ application
[6] On 2 August 2024, the Financial Markets Authority (the FMA) sought and obtained orders without notice under ss 522–524 of the FMCA (the Preservation Orders) directed at identifying and preserving the property of the Clarkes and other entities substantively under their management or ownership (the
1 Taylor v New Zealand Poultry Board [1984] 1 NZLR 394 (CA) at 398.
2 As defined Financial Markets Conduct Act (FMCA), s 522(4); see at [28]-[30] below.
3 Interim orders can be made where in the opinion of the Court it is desirable to do so: see s 524 of the FMCA.
Du Val entities). The Preservation Orders included an order appointing the Receivers as interim receivers and managers over all the property of the Du Val entities and receivers over all of the property of the Clarkes.
[7] All but five of the Du Val corporate entities were placed in statutory management on 21 August 2024.4 As a consequence, the Receivers remain in office only in respect of the Clarkes’ personal property and that of the five entities which are associated with the Clarkes’ family trust.5 The Receivers have been appointed statutory managers of the other entities.
[8] Extraordinarily, although orders were made in August 2024, the on-notice hearing of the FMA’s without-notice application is not scheduled to be heard until 16 June 2025. The delay largely stems from the Clarkes’ difficulties in obtaining legal representation. However, the Clarkes have recently confirmed that they are now represented in the proceeding.
[9] The Preservation Orders appointing the Receivers provide that in exercising their appointments the Receivers have powers (among other things):
(a)to identify, recover, take possession, manage and realise all of the property of any description of the relevant respondents;6 and
(b)in respect of respondents that are companies, enjoy and exercise all of the powers conferred on a liquidator of a company by ss 261, 262, 265, 266 and 269 of the Companies Act 1993 (the Companies Act) in the same manner as if they were a liquidator of a company under that Act.7
[10] Section 261 gives a liquidator the power to give notice requiring a director and certain other persons to attend on the liquidator to be examined on oath about the
4 I subsequently refer to the entities in receivership as “the receivership entities”.
5 On 7 October 2024, Campbell J additionally appointed the Receivers as receivers of the JK and CM Clarke Trust (the sixty-eighth respondent), which was not an initial respondent.
6 Preservation Orders, 3.8(c).
7 Preservation Orders, 3.8(e). Under 3.8(f) of the Preservation Orders, an equivalent order was made in respect to respondents that are limited partnerships under the Limited Partnerships Act 2008.
affairs of the company. The privilege of self-incrimination is expressly abrogated in such an examination.8 The FMA and Receivers accept that a person required to attend this examination is detained under the New Zealand Bill of Rights Act 1990 (the NZBORA) from the time the examination commences.9 Hence, a compulsory examination engages the rights of persons detained under s 23 of the NZBORA, such as the right to consult and instruct a lawyer.
[11] Following a hearing on 18 December 2024, I made orders sought by the Receivers that the Clarkes complete and provide to them a statement of financial means, and deliver to them and explain what had become of certain assets.10
[12] At this hearing, the Receivers also sought an order that the Clarkes “attend an examination by the Receivers and answer questions about their assets and financial position and those of the other entities in receivership”. Through this order the Receivers sought to enforce compliance with exercise of their powers set out in paragraph [9(b)] above, to examine the Clarkes on the affairs of the corporate entities. With reference to the Clarkes’ personal assets, the order sought is a new order not encompassed by those made without notice in August 2024.
[13] The backdrop is that the Clarkes had refused or declined to present themselves to the Receivers for interview. The Clarkes’ legitimate concern was that they remained without legal counsel and would be attending an interview without a legal adviser accompanying them. They also said the Receivers have a conflict of interest in conducting an examination of them as receivers when they are also the statutory managers of the other entities now in statutory management.
[14] Following the hearing, I sought submissions on whether the Court could confer a power of compulsory examination on the Receivers under ss 522–524.
[15]The outcome impacts on:
8 Companies Act 1993, s 267.
9 Official Assignee v Murphy [1993] 3 NZLR 62 (HC).
10 I issued a ruling without reasons on 19 December 2024. Reasons were subsequently given on
23 December 2024: Financial Markets Authority v Du Val Capital Partners Ltd (in statutory management) [2024] NZHC 4011.
(a)the efficacy of the order already made (referred to in paragraph [9](b) above) importing the Companies Act provisions;
(b)whether a further order should be made enforcing that order; and
(c)whether a new order should be made extending the examination to the Clarkes’ personal assets.
[16] The FMA indicated that the issue had not previously been the subject of serious argument and would have implications for their investigations more generally. Accordingly, I appointed Sarah Armstrong KC to assist the Court as contradictor.
Principles of interpretation
[17] On their face the words “any powers that the Court orders” in s 523(1)(h) are limitless. However, their scope is constrained by the application of the following principles of interpretation:
(a)The meaning of a provision is to be ascertained from its text and in the light of its context and purpose.11 The Court’s power may only be exercised to promote the policy and objects of the FMCA.12
(b)If the provision impacts rights and freedoms affirmed under the NZBORA, s 6 is engaged. By that section “[w]herever an enactment can be given a meaning that is consistent with the rights and freedoms contained in [the NZBORA], that meaning shall be preferred to any other meaning”.
(c)If the provision impacts on longstanding common law rights, the “principle of legality” is engaged.13 By this principle, Courts are slow
11 Legislation Act 2019, s 10(1).
12 Astra Zeneca Ltd v Commerce Commission [2009] NZSC 92, [2010] 1 NZLR 297 at [28].
13 Fitzgerald v R [2021] NZSC 131, [2021] 1 NZLR 551 at [51], per Winkelmann J.
to impute to Parliament an intention to override established common law rights and principles where that is not clearly spelt out.14
Summary of submissions
[18] The FMA and Receivers say I should not read down the expansive wording of s 523. The ability to confer a power on receivers to compulsorily examine is in accordance with the purpose of the FMCA. It is required to enable the receivers to discharge their function of preserving the assets of a potentially liable person which is necessary and desirable to protect the interests of aggrieved persons. They say that this outcome is supported by the Australian cases of Corporate Affairs Commission v Smithson15 and Richstar Enterprises Pty Ltd v Carey (No 5),16 and consistent with the powers a Court can give a receiver under the inherent jurisdiction of the Court.
[19] The FMA and Receivers point to the fact that similar orders have been made in previous cases under s 523.17 However, they acknowledge that there was no substantive consideration given to whether s 523 should be interpreted in this way.
[20] The FMA says that the sub-section does not give rise to any inconsistency with rights affirmed by the NZBORA and that the privilege against self-incrimination is abrogated by force of s 63 of the Evidence Act 2006 or by necessary implication.
[21] Ms Armstrong emphasises the nature of the power in issue, which is to compel a person to attend an examination undertaken by a third party out of court and to answer questions put to them irrespective of whether the answers may incriminate them. She submits that exercise of a power to conduct such examination interferes with a person’s liberty and engages fundamental rights under the NZBORA and at common law in circumstances that create a high risk of injustice.
14 Analysis of this principle and the relevant case law is synthesised by Palmer J in Four Midwives v Minister for COVID-19 Response [2021] NZHC 3064, [2022] 2 NZLR 65 at [54]–[64].
15 Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547 (NSWSC).
16 Richstar Enterprises Pty Ltd (No 5) v Carey [2006] FCA 684, (2006) 58 ACSR 6.
17 Financial Markets Authority v PTT Ltd (in rec) [2016] NZHC 692; Financial Markets Authority v Arena Capital Ltd [2015] NZHC 1156; and Financial Markets Authority v Hotchin [2011] NZHC 458, [2011] 3 NZLR 469 at [48]. In the latter case, Winkelmann J made orders in relation to the s 523’s predecessors, s 60G–60I of the Securities Act 1978.
[22] Ms Armstrong says that the courts have consistently described the power conferred on liquidators to compel examination as an extraordinary power.18 She also refers to other legislation where Parliament has expressly conferred such a power on an office holder, including on the FMA itself under s 25 of the Financial Markets Authority Act 2011 (the FMAA). She submits that to make orders of the nature sought would be entering into a field that properly is the province of the legislature, requiring express statutory authority.
[23] Ms Armstrong submits that s 523(1)(h) should be construed as enabling the Court to confer on a receiver any powers that the Court otherwise has jurisdiction to grant. That is, it does not enlarge the Court’s jurisdiction to give new and unheralded powers to receivers as (she says) it would here if receivers were given a power of compulsory examination. Less invasive powers are available, such as requiring answers to written questions or a Court-supervised examination.
[24] Ms Armstrong also contends if there is jurisdiction to make an order, it should not be exercised here. The Clarkes also raise concerns at prejudice to them of an examination and the Receivers’ conflict of interest.
The text of s 523(1)(h) in the light of its context and purpose.
The immediate statutory context
[25] An order appointing a receiver under s 523(1)(h) sits within the FMCA’s framework of orders that can be made to protect interests of “aggrieved persons”, in the case of financial markets investigations or proceedings.
[26] Section 522(1) sets out preconditions for the jurisdiction to make an order. In summary, this is where, in respect of a person:
(a)there is an investigation under the FMCA into contravention or possible contravention of a specified Act (s 522(1)(a)(i) and (ii));
18 Laing v KPMG Peat Marwick (1989) 4 NZCLC 65,180 (HC) at 65,182 (reviewing relevant English authorities), cited in Finnigan v Ellis [2017] NZCA 488, [2018] 2 NZLR 123 at [35].
(b)there is an investigation under the FMCA which may result in a prosecution or civil proceedings (s 522(1)(a)(ii));
(c)a prosecution has begun for an offence in a specified Act (s 522(1)(b));
(d)civil proceedings have begun under or in respect of a specified Act (s 522(1)(c)); or
(e)civil proceedings have begun in connection with financial products or services for a contravention, fraud, negligence, breach of duty or other misconduct (s 522(1)(d)).
[27] The context for orders being made therefore encompasses scenarios where the respondents are the subject of an inquisitorial regulatory investigation process that could lead to criminal prosecutions under the FMCA and/or the Crimes Act 1961. That is the case here, with the present orders made because the FMA is investigating the Clarkes and the Du Val entities for a range of conduct allegedly in breach of both statutes.
[28] Section 522(2) provides that the Court may, on application by the FMA or by an aggrieved person, make one or more of the orders listed in s 523 if the Court considers it necessary or desirable to do so for the purpose of protecting the interests of an aggrieved person. The public interest role of the FMA may warrant an order in circumstances when it might be denied on application of an aggrieved person.19
[29] Section 522(4) defines “aggrieved person” to mean “any person to whom a relevant person is liable”. “Relevant person” means “a person referred to in [s 522(1)]”: that is, a person being investigated, prosecuted or against whom civil proceedings have begun. “Liable” means “liable or may be or become liable, to pay money (whether in respect of a debt, by way of damages or compensation, or otherwise) or to account for financial products or other property.”
19 Financial Markets Authority v Hotchin above, n 17 at [57].
[30] Section 523 then sets out an exhaustive list of orders that may be made under s 522, including under s 523(1)(h) the appointment of a receiver over the property of a respondent “having any powers the court orders.” Appointment of a receiver under these provisions has been described as a drastic step.20 However it is one of a range of orders that can be made that are potentially highly coercive in preventing or requiring dealing with assets, money or financial products or making payments. The Court may also make orders requiring a respondent to hand passports over and prohibiting them from leaving New Zealand.
Purposes of the FMCA
[31] The FMCA relevantly specifies its “main” purposes in s 3. These are to promote the confident and informed participation of business, investors, and consumers in the financial markets, and to promote and facilitate the development of fair, efficient, and transparent financial markets.21 The specific purpose of the regime constituted by ss 522–524 is to ensure that the rights of aggrieved persons to damages, compensation or restitution are not frustrated through the assets of a liable person being dealt with in a way that renders them unavailable to meet those claims.22
[32] The provisions operate in a context where investigations of contraventions are often complex and lengthy. Available assets may dissipate in the meantime.23 The power of the Court under s 523(1)(h) to appoint receivers of property that may otherwise be dissipated is valuable in promoting the confident participation of investors in financial markets and facilitating the fairness, efficiency and transparency of those markets.24 The orders further the public interest in holding to account those who act in contravention of financial markets and associated legislation by protecting the private interests of aggrieved persons who may have claims.
20 Richstar Enterprises Pty Ltd (No 5) v Carey, above n 16, at [29].
21 Section 4 of the FMA sets out additional purposes.
22 Financial Markets Authority v PTT Ltd (in rec) above n 17 at [20] citing, Winkelmann J in relation to the predecessor section, s 60G–60I of the Securities Act 1978 in Financial Markets Authority v Hotchin, above n 17, at [48].
23 Financial Markets Authority v Hotchin, above n 17, at [48].
24 Financial Markets Authority v PTT Ltd (in rec), above n 17, at [20].
Wider legislative context
Companies Act 1993
[33] As noted above, with respect to the receivership entities, the Court has made an order without notice conferring on the Receivers all of the powers conferred on a liquidator of a company by ss 261, 262, 265 266 and 269 of the Companies Act in the same manner “as if” they were a liquidator of a company under that Act. Plainly the Companies Act does not “apply” as such. The Receivers accept this, but say that the orders have imported the mechanisms and machinery of these provisions.
[34] Section 261 empowers a liquidator (among other things) to summons a director of the company and certain other persons to be examined on oath by the liquidator (or a barrister or solicitor acting on the liquidator’s behalf) “on any matter relating to the business, accounts, or affairs of the company”. To give effect to this, s 265(1) empowers the liquidator or their barrister or solicitor to administer the oath or take an affirmation. Section 265 entitles a person examined under s 261 to be represented by a barrister or solicitor. Failure to comply with a notice under s 261 is an offence under the Companies Act, giving rise to liability on conviction to a penalty.25
[35] By s 266(1), on the application of the liquidator, the Court may order a person who has failed to comply with a requirement of the liquidator under s 261 to comply with that requirement. By s 266(2), the Court may, on the application of the liquidator, order a person to whom s 261 applies to attend before the Court to be examined.
[36] Under s 267, a person is not excused from answering a question in the course of being examined under s 261 or under s 266 on the ground that the answer may incriminate or tend to incriminate that person.26 The section goes on to provide that testimony of the person examined is not admissible as evidence in criminal proceedings against them except on a charge of perjury in relation to that testimony.
[37] The power given to a liquidator has been described as “an extraordinary power of an inquisitorial nature” which enables a liquidator, as a stranger to the affairs of a
25 Companies Act, ss 266(6A) and 373(3).
26 Section 266.
company, to enquire into and obtain the information they may need to carry out their duties on behalf of the general body of creditors and contributories.27
Other information gathering/compulsory examination provisions
[38] The wider statutory context is that there are multiple legislative provisions that specifically authorise regulatory bodies to require information. Ms Armstrong helpfully assembled a non-exhaustive list of these.28 Some require specific information to be provided. Others provide an express power to the relevant officer-holder to summon and compel examination on oath. There are often associated penalties for non-compliance, rights to expenses, constraints on how the information obtained may be used, specifics as to who can examine and who may be examined, and provisions addressing consequences for the privilege against self-incrimination.
[39] In some instances, more closely associated with entities of a corporate character, statutes have used the mechanism of incorporating by reference the powers of a liquidator “as if” they applied to the other statutory context.29
[40] The FMA has its own express interview and evidence-gathering powers available to it. Under s 25 of the FMAA, the FMA may require any person on whom written notice is served to supply information, produce documents, and appear and give evidence either orally or in writing, if it considers that such a course is “necessary or desirable” to perform its functions. Failure to comply “without reasonable excuse” is a criminal offence punishable with a fine not exceeding $300,000.30
27 Laing v KPMG Peat Marwick above n 18, at 65,182.
28 Most closely analogous are as follows: provisions relating to Commerce Commission investigations include the Commerce Act 1986, s 98; Fair Trading Act 1986, s 47G; and Credit Contracts and Consumer Finance Act 2003, s 113(c). Provisions relating to Serious Fraud Office and FMA investigations include the Serious Fraud Office Act 1990, s 9; and Financial Markets Authority Act 2011 (FMAA), s 25. Other examples include the Corporations (Investigations and Management) Act 1989, s 19; Companies Act, ss 261 and 265; Insolvency Act 2006, ss 165–172; Customs and Excise Act 2018, ss 26, 37(3), 39, 75, 89, 205, 218, 229, 230, 251(2), 252, 354 and 383; Trade Marks Act 2002, s 155C; Copyright Act 1994, s 144B; Insolvency Practitioners Regulation Act 2019
29 See s 182 of the Insurance (Prudential Supervision) Act 2010, under which statutory managers are granted the powers conferred on liquidators under ss 261 to 267 of the Companies Act; s 129 of the Banking (Prudential Supervision) Act 1989 and s 108 of the Overseas Investment Act 2005, which confer the same powers on statutory managers; s 309 of the Deposit Takers Act, which confers the same powers on resolution managers; and s 239AC of the Companies Act, which confers the same powers on voluntary administrators.
30 FMAA, s 61.
Receiverships Act 1993
[41] The Receiverships Act 1993 applies to all receivers including those appointed pursuant to contract or (as here) appointed by a court. This Act does not include provisions equivalent to ss 261 and 266 of the Companies Act that give a power of compulsory examination. Rather, s 12 of the Receiverships Act requires the grantor (here the Clarkes and the receivership entities) to make available to the receiver all books, documents, and information relating to the property in receivership in the grantor’s possession or under the grantor’s control. The grantor must also verify, if required to do so by the receiver, that the books, documents, and information are complete and correct by statutory declaration. The grantor must further give the receiver “such assistance as he or she may reasonably require”31.
[42] On the application of the receiver, the Court may make an order requiring the grantor32 to comply with s 12(1).33
[43] In my view, the grantor’s obligation to give assistance to the receiver in s 12 of the Receiverships Act does not go so far as extending to require a grantor to submit to compulsory examination before the receiver. This would give receivers appointed under contract in the private interest of a creditor an unjustifiably broad power. Had the legislature intended the default position to be that receivers have mechanisms available to them such as those in s 261 of the Companies Act, equivalent or express machinery would have been included in the Receiverships Act. That is particularly so when both statutes received royal assent on the same date.
Australian case law
[44] The genesis of ss 522–524 of the FMCA lies in closely aligned Australian provisions in the Corporations Act 2001 (the Australian Act).34 Australian case law may be helpful in interpreting the FMCA.35
31 Section 12(1)(c).
32 Or if the grantor is a body corporate, a director of the grantor.
33 Section 12(2).
34 Financial Markets Authority v PTT Ltd (in rec), above n 17, at [24].
35 At [24]–[25].
[45] Two Australian cases on receivers appointed under the equivalent provisions are of particular relevance. First, in Corporate Affairs Commission v Smithson, the receivers considered that information provided by the respondents was deficient. They applied for powers requiring the respondents to attend at court and answer questions on oath or affirmation relating to their property. In the alternative, orders were sought empowering the receiver to require their attendance for examination by the receiver and to provide documents.
[46] Waddell J dismissed the application. He rejected an argument that it was inherent in the general scheme of the Australian Act’s equivalent to ss 522–524 that the court should be able to grant powers to receivers of a kind conferred by statute on liquidators. He considered:36
[I]t seems to me that, bearing in mind the powers expressly given to liquidators and trustees in bankruptcy, it should not be inferred that similar powers have been given by implication to such a receiver. Then it is said that the court has inherent jurisdiction to make orders in aid of a receiver appointed under [the Australian equivalent of s 523(1)(h)]37 … However, it seems to me that to say that the court has inherent jurisdiction to make powers of the kind sought by the receiver is to go far beyond what is necessary for the administration of justice pursuant to [the Australian equivalent of s 523(1)(h)] and to enter upon a field which is properly the province of the legislature. I do not think that this conclusion is affected by the circumstance that the court has made orders which the receiver claims have proved to be ineffective.
[47] Rather, Waddell J outlined what could be done to enforce an order for the appointment of a receiver over all of the property of a relevant person:38
What then can be done to enforce an order … for the appointment of a receiver of all of the property of a relevant person. Such an order should, I think, ordinarily be accompanied by an order having the effect of requiring the relevant person to file in court an affidavit listing all his property and a further order having the effect of requiring him to transfer or deliver all of it to the receiver. If the relevant person fails to comply with such orders proceedings could be taken against him for contempt of court or, in my opinion, an order could be made [under the equivalent of the High Court Rules] for him to attend before an officer of the court and be orally examined on such questions concerning or in aid of the enforcement of the order as may be specified in the order for examination.
36 At 554.
37 Companies (New South Wales) Code, s 573.
38 At 554.
[48] The second Australian case is Richstar Enterprises Pty Ltd v Carey (No 5). There, the regulator, ASIC, sought orders that the respondent, whose property the receivers were appointed over, attend Court to be examined on an affidavit of assets filed. French J rejected the argument that to make such an order, the Court needed to be satisfied there was a substantial likelihood that the respondent had filed a deficient affidavit - that is, non-compliance with orders requiring the affidavit was not necessary.
[49] After citing the dictum from Corporate Affairs Commission v Smithson at [46] above, French J considered:
[57] The court may make such ancillary orders in support of its disclosure requirements as are necessary to enable the receivers it has appointed properly to discharge their functions. The power to do so derives from s 23 of the Federal Court of Australia Act, if from no other source. That power may well have a wider application than the power to make orders ancillary to a Mareva or other injunction in proceedings between private parties. The court could, as an incident of its power to appoint receivers, require a relevant person to present himself or herself for examination by the receivers or ASIC before a registrar in order to ascertain the extent and nature of the person’s assets. The use of a disclosure affidavit is not required in every case. It is simply a mechanism to the same end. The court is not confined to directing the filing of a disclosure affidavit and only if that is inadequate directing oral examination of the deponent.
(emphasis added)
[50] French J referred to s 23 of the Federal Court of Australia Act 1976, which provides that:39
The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.
[51] Significantly, the order French J made was that the respondent attend Court for examination, not that the receivers could compel the person for examination before them privately.40
39 For further discussion see Robert S French “Stopping the Train after the Wreck: Corporate Group Collapse and Protective Orders under Section 1323” (2007) 3 BalJlNTLawSoc 18.
40 The Australian context is that even liquidators cannot themselves examine outside of Court (Corporations Act 2001, s 596A and 596B). That is in contrast to New Zealand where s 261 does confer this power on a liquidator pursuant to what the Court of Appeal has described as “light-handed regulation” reducing Court involvement in the liquidation process in the interests of efficiency: see Finnigan v Ellis, above n 18, at [16]–[17].
[52] Like the Court in Richstar, I consider that it is open for the Court to require attendance of a person before the Court (either before the Registrar or a Judge) for oral examination on oath directed at the identification and the location of assets of that person where receivers have been appointed to preserve assets under s 523(1) and where it is necessary or desirable in the interests of an aggrieved person. Such an ancillary order is made in exercise of the Court’ inherent powers to ensure the efficacy of its own orders.41 The efficacy of an order appointing receivers under s 523(1)(h) is undermined if the receivers cannot locate and identify assets that they have been appointed to preserve.
[53] Alternatively, such a direction could be made under s 539 of the FMCA, under which the Court can direct a person to do an act so as to secure compliance with any order made under the FMCA.42 The order to attend for cross-examination would secure compliance with an order appointing receivers under s 523(1)(h) in the sense of making effective the performance by the receivers of their powers and attendant obligations of the respondent over whose assets receivers are appointed.
[54] As I will discuss later, I consider the fact that the Court could require a respondent to attend to be examined in Court by a receiver appointed under s 523(1)(h) is important to assessing whether an order can be made enabling receivers to examine respondents out of Court.
Inherent jurisdiction/common law powers
[55] Counsel submitted that the powers a Court can give a receiver under its inherent jurisdiction is relevant context. A receiver appointed under the FMCA is akin to a receiver appointed under the Court’s inherent jurisdiction who, as an officer of the Court, acts to protect the interests of all stakeholders.43 A Court-appointed receiver
41 Siemer v Attorney-General [2013] NZSC 68, [2013] 3 NZLR 441 at [113]; and M v Attorney-General (1997) 15 CRNZ 148 (CA) at 151. For somewhat analogous circumstances, refer AJ Bekhor & Co Ltd v Bolton [1981] 2 ALL ER 565 at 577
42 Section 539 of the FMCA provides that: “The court may, for the purpose of securing compliance with any other order it makes under this Act, direct a person to do or refrain from doing a specified act.”
43 See Financial Markets Authority v PTT Ltd (in rec), above n 17, at [43].
is answerable to the Court. They must act impartially and adhere to the standards expected of a judicial officer.44
[56] The FMA and Receivers drew my attention to Bank of New Zealand v Rowley,45 where Dobson J made orders equivalent to those sought and obtained by the FMA here. Individuals behind two trusts had been convicted of fraud in procuring advances from the applicant bank. Some of the money was channelled to the trusts. The extent and status of trust assets remained unclear. Dobson J rejected that the Court could liquidate the trusts. However, instead he appointed receivers to the trust assets as an exercise of the Court’s inherent jurisdiction. The terms of the appointment empowered the receivers to exercise the powers conferred on liquidators under ss 261-267 and ss 273–274 of the Companies Act. Dobson J considered that a case had been made out for an intervention resembling a quasi-liquidation, with ascertainment of the assets an appropriate component of the orders.46
[57] Although the Court is exercising a statutory jurisdiction here, the FMA says the legislature should be taken as knowing the law as reflected in Bank of New Zealand v Rowley. It says that s 523(1)(h) should therefore be interpreted as contemplating the conferral of the above liquidators’ powers under the Companies Act.47 However, I consider that, on its own, Bank of New Zealand v Rowley is a fragile basis for the proposition that the Court can give a receiver a power of compulsory examination. There was no contradictor to the appointment of receivers in that case.48 Nor was there any substantive consideration of whether there were ramifications for fundamental rights. The circumstances were also somewhat unusual in that the orders were sought in aid of execution when the principals were already serving prison sentences for the conduct in issue.
44 Rea v Omana Ranch Ltd [2012] NZHC 2639, [2013] 1 NZLR 587 at [11].
45 Bank of New Zealand v Rowley [2012] NZHC 3540, (2012) 3 NZTR 22-035.
46 At [29].
47 See, for example, Re Otago Clerical Workers’ Award [1937] NZLR 578 (CA) at 663.
48 The receivers were appointed at the Official Assignee’s suggestion, whose counsel referred the Court to similar powers having been conferred upon liquidators in Yates as Trustee of the Bowden No 14 Trust ex parte Five Star Consumer Finance Ltd (in rec) HC Auckland CIV-2007-404-7927, 7 April 2008. This latter order was made by a minute of the Court, suggesting it was unopposed or there was no substantive argument.
[58] There are a number of areas in which the Court can authorise an officer of the Court to examine someone outside Court. However, these have a regulatory or statutory basis.49 The Privy Council decision in Singularis Holdings Ltd v PricewaterhouseCoopers50 supports that such a power does not require a statutory basis, but suggests a cautious approach to developing common law powers of compulsion.
[59] In Singularis, the majority of the Board accepted that, at common law, courts had the power to order the production to a foreign liquidator of information in oral or documentary form, that information being necessary for them to carry out their statutory duties.51 The orders sought extended to orders for examination by the liquidators of the accountants of the liquidated company. This aspect of the decision was in obiter because the appeal failed on other grounds. However, the Board devoted considerable analysis to whether there was a legitimate basis for developing the common law to cover the case before it.
[60] Lord Sumption gave the lead opinion for the majority.52 He considered that the jurisdiction developed by the courts to make a Norwich Pharmacal order demonstrated that the common law was capable of developing a power to compel the production of information when necessary to give effect to a recognised legal principle.53 He saw an analogous power as arising in the case before the Board to support the principle of modified universalism, by which national courts are encouraged to render assistance to foreign courts in winding up companies on a global basis, in the spirit of international comity.54 This was in the public interest and distinguishable from information being sought for commercial purposes or for ordinary adversarial litigation.55
49 For example, examination of an overseas witness under r 9.17 of the High Court Rules 2016, and examination for the purposes of execution under r 17.12.
50 Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36, [2015] AC 1675. The matter concerned an appeal from the Court of Appeal for Bermuda.
51 Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133 (HL) recognised a common law power to order the production of information about the identity of a wrongdoer.
52 Lord Clarke and Lord Collins concurred.
53 This was in the nature of development from the jurisdiction in Norwich Pharmacal Co v Customs & Excise Commissioners, which recognised a common law power to order the production of information about the identity of a wrongdoer.
54 At [23].
55 At [23].
[61] Lord Sumption emphasised that the liquidators required the information for the purpose of their ordinary functions attaching to their status as liquidators and officers of the Court. He considered that recognition by a domestic court of the status of a foreign liquidator “would mean very little if it entitled him to take possession of the company’s assets but left him with no effective means of identifying or locating them”.56
[62]Development of a common law power in this area came with a caution:57
In recognising the existence of such a power, the Board would not wish to encourage the promiscuous creation of other common law powers to compel the production of information.
[63] Lord Mance strongly disagreed with the majority view, including rejecting a distinction Lord Sumption had made between provision of information and evidence as one likely to appear illusory in practice in the context of an insolvency practitioner.58
[64] I am addressing here whether a statutory provision can be interpreted to allow the Court to confer a power of compulsory examination. It is not necessary (nor would it be appropriate) for me to expound on how far common law extends. However, Singularis has some relevance to the interpretation issue. Indeed, it can be interpreted to both support and undermine the argument that the power of compulsory examination can be conferred.
[65] First, Ms Armstrong submits that s 523(1)(h) should not be interpreted as enlarging the Court’s jurisdiction to give new and unheralded powers to receivers. That begs the question of what powers the Court can give a receiver. Singularis supports a cautious approach to development of powers to compel information at common law. Rowley provides only tenuous support to the proposition that the Court can give receivers this power in its inherent jurisdiction. Singularis therefore adds support to Ms Armstrong’s contention that powers to be given to receivers would not naturally encompass such an exceptional power.
56 At [23].
57 At [25].
58 At [141].
[66] On the other hand, Lord Sumption’s opinion in Singularis echoes the Court’s reasoning in Richstar for making ancillary orders: to support a receiver appointed under the equivalent of s 523(1)(h) in carrying out their ordinary functions. Further, the rationale for acknowledging the power in Singularis included that the power was necessary for an officer of the court to discharge their functions in a context where there was a strong public interest.
Inconsistency with NZBORA rights and freedoms?
[67] I turn to the principles of interpretation that relate to inconsistency with rights and freedoms in the NZBORA and at common law.
NZBORA
[68] When I sought submissions, I identified a potential issue of consistency with NZBORA-affirmed rights with an interpretation that would permit the Court to confer a power of compulsory examination on the Receivers, and hence to detain a person. On analysis, I agree with the FMA that there is no inconsistency raised.
[69] Section 22 of the NZBORA does not guarantee freedom from detention, only from arbitrary detention. Any detention for examination would follow on from the Court’s conferral of powers on a receiver to detain the examinee. A detention is not arbitrary where it is authorised by statute and the power is exercised in accordance with clearly articulated standards.59 If the legislature has empowered the Court to authorise a receiver to detain a person for a specific purpose, then the detention is not arbitrary. Similar points apply to the right to freedom of movement in s 18, with the restriction on freedom of movement being one effected by law. It is a different issue whether the provision should be interpretated as empowering the Court to confer a power to detain.
[70] Ms Armstrong submitted that the right to silence in s 23(4) is engaged. This applies where a person is detained “for any offence or suspected offence.” She says s 23(4) is engaged because the Receivers are appointed in reliance on
59 Neilsen v Attorney-General [2001] 3 NZLR 433 (CA); Zaoui v Attorney General [2005] NZLR 577 (CA) at [82]–[102]; and Re M [1992] 1 NZLR 29 (HC) at 42.
evidence of alleged criminal offending by the proposed examinees, the Clarkes, and in the context of an investigation. This interprets s 23(4) in overly elliptical terms. Thomas J rejected a similar submission in Official Assignee v Murphy.60 The Receivers’ examination and hence any detention is to obtain information about the respondents’ assets so that these can be preserved. It does not become a detention “for any suspected offence” simply because of the wider context.
Principle of legality
[71] This common law principle of statutory interpretation exists independently of the NZBORA to protect and uphold certain rights and values that the common law has identified as fundamental.61 Section 6 of the NZBORA incorporates aspects of the principle, but does not displace or confine it. The essence of this principle is that courts will proceed on the basis that clear words are needed if legislation is to be construed as abridging fundamental rights or freedoms.62 Hence, when the courts undertake the interpretive exercise, they must presume a rights consistent purpose.
[72] Lord Browne-Wilkinson observed in R v Secretary of State for the Home Department, ex parte Pierson:63
A power conferred by Parliament in general terms is not to be taken to authorise the doing of acts by the donee of the power which adversely affect … the basic principles on which the law of the United Kingdom is based unless the statute conferring the power makes it clear that such was the intention of Parliament.
[73] I agree with the analysis of Palmer J in Four Midwives v Minister for COVID-19 Response that justified limits on rights do not represent rights violations.64 The principle of legality should not be used to avoid interpretations of statutes that
60 Official Assignee v Murphy [1993] 3 NZLR 62 (HC) at 72.
61 Fitzgerald v R, above n 12, at [51].
62 At [55].
63 R v Secretary of State for the Home Department (ex parte Pierson) [1998] AC 539 at 575.
64 Four Midwives v Minister for COVID-19 Response, above n 14, at [63]–[64]. Palmer J cited Hanna Wilberg “Common Law Rights have Justified Limits: Refining the “Principle of Legality” in Dan Meagher and Matthew Groves (eds) The Principle of Legality in Australia and New Zealand (The Federation Press, Sydney, 2017) 139. This chapter was cited by Winkelmann CJ at n 200 in D (SC 31/2019) v New Zealand Police [2021] NZSC 2, [2021] 1 NZLR 213, another recent Supreme Court decision discussing the principle of legality.
represent justified limits.65 That is, the principle is that legislation should not limit such rights more than is reasonable and demonstrably justified in a free and democratic society. A sense of proportionality has to be maintained in cases where the justification for the limitation on rights far outweighs the interference with rights.66 Approaching the principle in that way also means that there is consistency with the type of analysis undertaken under ss 5 and 6 of the NZBORA.
[74] Does the interpretation sought by the Receivers affect a “fundamental” common law right or principle?67 The privilege against self-incrimination is not affirmed in NZBORA, but is of long-standing fundamental importance. Accordingly, if an interpretation of s 523(1)(h) that includes an ability to confer a power of compulsory examination impacts that privilege, the principle of legality is relevant. The privilege is an aspect of that wider common law principle: every citizen has in general a right to refuse to answer questions from anyone, absent a statutory duty to the contrary.
[75] The Companies Act provisions referenced in the powers conferred on the Receivers by the Preservation Orders abrogate the privilege against self-incrimination, but the testimony obtained is not admissible in criminal proceedings against the examinee apart from for perjury.68 The FMA and the Receivers say that any interview of the Clarkes (including about their personal assets) would be conducted under the same conditions. However, as I noted earlier, the Companies Act provisions cannot “apply” by the mechanism of the Preservation Orders.
[76] The impact on the privilege against self-incrimination of the interpretation of s 523(1)(h) so as to empower compulsory examination turns on ss 60–63 of the Evidence Act 2006. Those sections address the abrogation of the privilege in civil proceedings.
65 Four Midwives v Minister for COVID-19 Response, above n 14, at [63]–[64]. See also Jason NE Varuhas “The Principles of Legality in Aotearoa New Zealand” (2023) 34 PLR 296 at 307, citing R(O) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255 at [41].
66 Taylor v New Zealand Poultry Board, above n 1, at 402 per Cooke J. See also Wilberg, above n 64, at 145–146.
67 Fluoride Action Network (NZ) Inc v Hastings District Council [2024] NZHC 1313, [2024] 2 NZLR 779 at [40] citing Wilberg, above n 64.
68 Companies Act, s 267.
[77] Section 60 is engaged where a person is required to provide specific information “in the course of a proceeding”.69 A proceeding includes any civil proceeding conducted by a court and “any interlocutory or other application to a court connected with that proceeding”.70 If s 60 applies, then subject to s 63 (which abrogates the privilege as discussed below) a person has a privilege in respect of the information and cannot be required to provide it. Under s 63(3), the person enjoys that privilege unless an enactment removes the privilege either expressly or by necessary implication, or to the extent the enactment does not so remove it.
[78] In substance, s 63 replicates s 267 of the Companies Act but applies it to all civil proceedings. Section 63 applies to a person who is required “by an order of the court made for the purposes of a civil proceeding” to disclose specific information.71 That person does not have the privilege provided for by s 60 and must comply with the terms of the order. However, under s 63(3), no evidence of any information that has “directly or indirectly” been obtained as a result of the person’s compliance with the order “may be used against the person in any criminal proceeding, except in a criminal proceeding that concerns the falsity of the information”.72
[79] Ms Armstrong outlined the prejudice that is caused if the privilege is abrogated by s 63(2), despite the immunity in criminal proceedings provided in s 63(3). Section 63(3) does not preclude the investigation of offences based on information disclosed. A receiver has an obligation to inform the relevant statutory body (including the Registrar of Companies, the FMA and Serious Fraud Office) of any information it receives that may need to be investigated under those Acts.73 Accordingly, applied to the present circumstances, the Receivers would be obliged to pass on any such information compelled from the Clarkes in an examination. There would appear to be no barrier on using this information in civil proceedings associated with the substantive claims being investigated.
69 Section 60 of the Evidence Act 2006 also applies if a person is required to provide specific information “by a person exercising a statutory power or duty”. A receiver is not exercising a statutory power or duty if they require a person to give information pursuant to powers conferred on them by the Court under s 523(1)(h). The Court is exercising a statutory power when it appoints the receiver. It is the Court that gives a receiver the powers they exercise, not the statute.
70 Section 4(1).
71 Section 63(1)(a).
72 Section 63(3).
73 Insolvency Practitioners Act, s 60.
[80] However, in considering the wider context earlier, I concluded at [52] above that the Court has the inherent power to require the attendance of a person before the Court for oral examination by a receiver, directed at the identification and location of assets of that person where receivers have been appointed under s 523(1)(h) to preserve assets. This is to give efficacy to a receiver’s powers under s 523(1)(h), adopting the reasoning in Richstar. In that scenario, ss 60 and 63 of the Evidence Act would also abrogate the privilege against self-incrimination. The “civil proceeding” here is the FMA’s application for orders under s 522. Information supplied in an examination before the Court is specific information required to be provided “in the course of” that proceeding within s 60. Section 63 would apply to abrogate the privilege in respect of the information disclosed in an in-Court examination of this kind because, under s 63(1), “a person is being required by order of a court made for the purposes of [that] civil proceeding” to make disclosure.
[81] If an order can be made under s 523(1)(h) giving a receiver a power of compulsory examination, the examinee is in no worse position insofar as the privilege is concerned. The privilege is likely similarly abrogated. Information supplied in such an examination is specific information required to be provided “in the course of” the proceeding under s 522.74 Under s 63 of the Evidence Act, the person examined by a receiver in such circumstances is required by the Court’s order made for the purposes of the proceeding under s 522 to disclose the information.
[82] In summary, interpreting s 523(1)(h) to empower the Court to confer on a receiver a power of compulsory examination out of Court would not abrogate the privilege against self-incrimination any more than it is abrogated under s 63 through the inherent power available to the Court to order an in-Court examination to give efficacy to its orders. For reasons discussed below, I consider that this supports an interpretation of s 523(1)(h) that enables the Court to confer the power of compulsory examination on receivers appointed under that provision.
74 That is because the Court continues to have a supervisory role over the court-appointed receiver until they are discharged, hence distinguishing the position from the more usual context where a Court’s role is complete on the making of orders sought in an application.
[83] For completeness, the FMA’s position is that, in any event, the FMCA provisions removed the privilege against self-incrimination altogether by necessary implication, under s 60(3) of the Evidence Act.75 I disagree. The “necessary implication” here would need to be derived simply from the Court’s power to appoint receivers and give that office holder “any” powers. The receivers’ investigation into assets to be preserved under powers given to them would not always be frustrated if the relevant person could claim a privilege against self-incrimination.
Decision on interpretation of 523(1)(h)
[84] I return to the central question: do the words “any powers that the court orders” in s 523(1)(h) allow the Court to confer on receivers appointed under s 523(1)(h) the power to compel a person to attend and be examined by them?
[85] A receiver appointed by the Court under the FMCA will already have the powers of a receiver under the Receiverships Act. I accept the FMA’s submission that s 523(1)(h) is concerned with what further powers are necessary or desirable to protect the interests of aggrieved persons.
[86] To summarise my earlier discussion, the factors supporting constraints on those powers are that:
(a)Multiple enactments expressly confer on an office holder a power to require information or compel examination, including the FMA under powers given in the FMAA. This suggests caution in concluding that apparently expansive words such as “any powers” was intended to do what Parliament has commonly implemented by explicit provision.
(b)Development of common law powers to compel production of information is also cautious, reflecting the principle that a person generally has a right to refuse to answer questions from anyone.
75 New Zealand Apple and Pear Marketing Board v Master & Sons Ltd [1986] 1 NZLR 191 (CA) at 193; and Taylor v New Zealand Poultry Board, above n 1.
(c)A liquidator’s statutory powers to compel examination are viewed as extraordinary.
[87] However, there are strong indications that the legislature intended both wide and flexible powers to be available. Sections 522–524 fall to be interpreted in a statutory context where the legislature has deliberately provided for invasive and far-reaching orders to be made in service of the public interest. While the Court must ensure it does not go beyond what is “necessary or desirable” to address the risk of dissipation of assets in a particular case, I agree (as the Court has previously stated) that the circumstances in which it will be necessary or desirable to make orders and confer associated powers will be diverse. Therefore, “[t]hresholds and principles should not be developed that fetter that discretion”.76 This is important for retaining the necessary flexibility to meet specific circumstances that may require bespoke solutions.
[88] It is instead the Court’s role to identify, as a matter of factual evaluation in each case, which orders are the least restrictive orders compatible with protecting the interests of aggrieved persons. That is the legislative intent. While “the court should exercise care before making any orders”77 in each case, establishing categorical limits on what orders might be made would not align with Parliament’s intent.
[89] Consistent with the purpose of the FMCA provisions referred to earlier, the purpose of appointing receivers under s 523(1)(h) is to aid the public regulatory and protective functions conferred on the FMA.78 The receivers’ function is to identify and preserve assets for the benefit of potentially aggrieved persons (and more broadly) to further confidence in financial markets. I accept that this objective would be undermined if receivers do not have the ability to obtain adequate information to identify and locate the assets subject to receivership.
[90] Again, I return to the equivalent point made in Singularis that a receiver cannot discharge their function of preserving assets without first identifying and locating
76 Financial Markets Authority v Hotchin, above n 17, at [52].
77 At [50].
78 Richstar Enterprises Pty Ltd (No 5) v Carey, above n 16, at [22].
them.79 The orders I have made requiring statements of assets and liabilities reflects this. In complex scenarios, which will be common, receivers coming cold to the documents may often be hamstrung without recourse to oral examination.
[91] Accordingly, I consider that the Court must be able to facilitate oral examination in order for the receivers to properly discharge the purpose of their appointment under s 523(1)(h).
[92] I have concluded that the Court has power to require attendance of a person before the Court for oral examination on oath directed at the identification and location of assets of that person, where receivers have been appointed to preserve assets under s 523(1). In this way the Court can give efficacy to the receiver’s role. In any such examination, the privilege against self-incrimination is abrogated by operation of ss 60–63 of the Evidence Act. An interpretation that extends to give power to a receiver to examine out of court does not result in a further abrogation on the fundamental right to refuse to answer questions or to incriminate oneself. It means that the questions are answered on examination by the receiver out of court rather than in court.
[93] Of course, if an examination takes place before a receiver out of court, it is not supervised by the Court. It has been held that the function of the Court in examinations of this type is to ensure fair play. In Official Assignee v Murphy, Thomas J identified this consideration in drawing a distinction (as to whether there is a “detention”) between a summons to give evidence in Court and a summons to be examined by the Official Assignee outside of Court:80
Being brought before a Court of law or a tribunal, which is likely to be a Court of record, to give evidence, with all the safeguards for a witness which are inherent in the constitution and procedure of such Courts, is quite a different matter from appearing before an Assignee for what is essentially an interrogation conducted in private. While Assignees are conscientious public servants who undoubtedly act with the best of intentions, the possibility exists under the statutory scheme that their powers may be exceeded or even abused. A bankrupt or other person being examined could be prejudiced by any such error. Indeed, in this case, Mr Murphy expressed concern that certain of the Assignee's questions were irrelevant, and it did not seem to me that his concern was altogether unfounded. He further feared that his position could be
79 Singularis Holdings Ltd v PricewaterhouseCoopers, above n 50, at [23].
80 At 71.
compromised by yet other questions. More than once he felt the need for legal advice.
[94]However:
(a)The permitted scope of an examination by a receiver to discharge their functions under s 523(1)(h) is more confined than in the insolvency context discussed in Official Assignee v Murphy. That narrower scope suggests that the possibility of abuse is less.
(b)A person subject to compulsory interview out of Court has the rights of a person detained under the NZBORA. Having said that, a person who is being examined is not under a physical restraint, or any immediate threat of physical restraint, and is able to leave an examination at any time.81
(c)The Court retains its supervisory role over the receivers it has appointed and over the process.
[95]There are also aspects of an examination in Court that need to be emphasised:
(a)An examination before a receiver is in private whereas examination before the Court is likely be a public examination in the absence of orders for suppression. The examination is directed at a person/entity’s private assets. Privacy considerations tends to support that the statutory wording of 523(1)(h) extends to a power of examination by the receiver out of Court, given that the alternative is an examination in Court.
(b)If examination before the Court is required, there will inevitably be significant delay. This runs counter to the purpose of ss 522–524 and the likely context to applications under s 522, which may well require urgent steps to be taken.
81 Official Assignee v Murphy [1993] 3 NZLR 62 (HC) above, no 62 at 70.
(c)There is likely to be significantly more cost (as well as diversion of judicial resources) if the only avenue is for a Court-supervised examination. The costs of such a process would be met by either the FMA or out of the assets secured, should the Court make such orders. It involves greater complication, inefficiency, cost and delay than if the receiver could conduct oral examination.
[96] In short, if the only examination mechanism to give efficacy to the appointment of receiver is for an examination in Court there would be consequences that run counter to furthering the purposes of the FMCA or are negative for the respondents themselves. I conclude that the legislature must have intended that the words “any powers” embrace the Court giving a receiver the power to compel attendance at an examination under s 523(1)(h).
[97] I am also satisfied that such an interpretation of s 523(1)(h) is a justified limit on the common law rights engaged, in light of the public interest in enabling receivers appointed under s 523(1)(h) to perform their functions, the limited practical risk of abuse or injustice, and the advantages of an examination before receivers out of Court. This is not to the exclusion of the possibility of orders being obtained for examination by the Court in a proper case. Nor does it mean that these should become “default” powers that are sought in every case. They need to be justified in the specific circumstances.
Should orders be made giving the Receivers power to compel examination?
[98] I have concluded that the FMCA does permit the Court to confer on the Receivers a power to compel examination at interview. The specific orders sought now are orders requiring the Clarkes’ attendance for an examination. The Clarkes have previously refused or declined to attend an interview. In my view, the orders sought are necessary and desirable to protect the interests of aggrieved persons by enabling the Receivers to identify and locate the assets that they are charged with preserving for the following reasons:
(a)The Receivers have outlined to the Court uncertainties and queries they continue to have about the Clarkes’ assets and financial position and
those of the other receivership entities. Absent the examination orders, these uncertainties will remain unresolved.
(b)The Receivers wish to examine the Clarkes as to whether certain assets are those of the Clarkes or of the companies in statutory management. The Clarkes contend that the Receivers have a conflict of interest, in that they are also the statutory managers. I do not consider that of itself detracts from the justification of the orders sought. Unless and until the Receivers are discharged, they are charged with performing the function of preserving the assets for the benefit of aggrieved persons. The Court should not impede the performance of that duty on the basis of an alleged conflict for so long as they remain in their role.
(c)The FMA has committed not to seek a copy of the information obtained from the Clarkes by the Receivers other than with their consent or as permitted by law. I accept that this mitigates prejudice to the Clarkes to some degree. However, the practical effect of this commitment is reduced by the reporting obligations on receivers by s 60 of the Insolvency Practitioners Regulation Act 2019. This is, in turn, itself somewhat mitigated by the immunity provided to the Clarkes by s 63 of the Evidence Act.
(d)The Receivers say they are fully cognisant of the permitted scope of the interview and can be expected to not abuse the process. The Clarkes are now represented by senior counsel. They have the right to have their experienced legal counsel attend the interview, who will also be in a position to advise the Clarkes if any apprehended overreach occurs. There is ultimate Court supervision through the ability of the Clarkes or the Receivers to come back to the Court.
The form of the initial Preservation Orders
[99] The Preservation Orders grant to the Receivers the ability to enjoy and exercise all of the powers conferred on a liquidator of a company by ss 261, 262, 265 266 and 269 of the Companies Act, “as if” they were a liquidator of a company under that Act.
[100] This appears to be a standard order applied for by the FMA. In my view, such an order needs to be specifically justified on the facts of the application. I am not presently considering an application to vary or rescind that order. I have found that the orders that are now sought by the Receivers for compulsory examination to be justified as necessary or desirable within s 522(1). Provision for a power to compulsorily examine may well have always been an appropriate exercise of discretion under s 524. I say no more about that now.
[101] However, I do need to comment on the form of the orders. The apparent intention of the order made is to give a court-appointed receiver rights and powers “as if” the Companies Act applied. It purports to do by shorthand reference what could be set out in full.
[102] The mechanism obfuscates what powers are being conferred and the associated obligations and/or privileges of the Clarkes. To take key examples:
(a)A penalty under the Companies Act for non-compliance plainly is provided for by s 261(6A). That penalty does not simply apply in the present case “as if” the Receivers were liquidators.
(b)The privilege against self-incrimination is not addressed by ss 266 and 267 of the Companies Act but falls to be considered under the Evidence Act provisions.
(c)The order made purported to confer on the Receivers and their lawyers the power under s 265 to administer an oath for the oral examination that is contemplated. I am not aware of any basis on which the Court can authorise a person to administer the oath without statutory provision.82 While a barrister or solicitor (and hence the Receivers’ lawyers) can take an affidavit, that is not what is envisaged in this instance.
82 Section 6 of the Oaths and Declarations Act 1957 provides that no person shall administer an oath if they do not have the “jurisdiction or cognisance by some law in force”.
[103] Accordingly, while the substance or aspects of the orders may be effective to confer a power of compulsory examination on the Receivers, the form of the orders is, at best, untidy.
[104] It may be appropriate for Preservation Orders 3(e) and 3(f) to be modified if and to the extent they remain the source of the Receivers’ powers for any further steps that need to be undertaken, and that are not covered by the orders I am now making. However, I make no present orders addressing this issue, which would require input from counsel.
Result and Orders
[105]In my view, the orders sought by the Receivers should be made.
[106] I order that upon such date as the Receivers and the Clarkes agree (or in the absence of agreement as ordered by the Court), the Clarkes are to attend an examination by the Receivers and answer questions about their assets and financial position and those of the other entities in receivership.
Anderson J
Copy to:
R Mansfield KC and S L Cogan S A Armstrong KC
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