Financial Markets Authority v Jackson - [2018] NZHC 2052

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000948

[2018] NZHC 2052

UNDER Section 48 of the Financial Markets Authority Act 2011 and part 21 of the High Court Rules

IN THE MATTER

of a case stated by the Financial Markets Authority

BETWEEN

FINANCIAL MARKETS AUTHORITY

Applicant

AND

NEALE JACKSON and BRENDAN

JAMES GIBSON as voluntary

administrators of CBL Corporation Limited (administrators appointed) of Korda Mentha Interested Parties

Hearing: 6 August 2018

Appearances:

J A Farmer QC, K C Francis, and B A Keown for Applicant R B Stewart QC, D J Friar, and N F D Moffatt for Interested Parties

Judgment:

13 August 2018

JUDGMENT OF VENNING J

This judgment was delivered by me on 13 August 2018 at 11 am , pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors: Meredith Connell, Auckland
Bell Gully, Auckland

Counsel:J A Farmer QC, Auckland R B Stewart QC, Auckland

FINANCIAL MARKETS AUTHORITY v JACKSON & GIBSON as voluntary administrators of CBL Corporation Limited [2018] NZHC 2052 [13 August 2018]

[1] The Financial Markets Authority (“FMA”) seeks the opinion of the Court on the following questions of law:

(a)Do the disclosure obligations imposed by r 10.1.1(a) of the NZX Main Board/Debt Market Listing Rules (“Listing Rules”) and s 270 of the Financial Markets Conduct Act 2013 (“the Act”) continue to apply to a listed issuer, (whether of debt or equity securities) that has been placed into voluntary administration under Part 15A of the Companies Act 1993?

(b)If so, are those disclosure obligations fully discharged by the voluntary administrator/s of the listed issuer complying with the periodic reporting obligations imposed on voluntary administrators by Part 15A of the Companies Act 1993?

Background

[2] The FMA regulates financial services and securities markets in New Zealand. Its main statutory objective is to promote and facilitate the development of fair, efficient and transparent financial markets. Its functions include monitoring compliance with and enforcing provisions of the Act.

[3] Section 270 imposes a statutory obligation on listed issuers to comply with continuous disclosure provisions of the listing rules relating to the licensed markets on which they are listed.

[4] Entities listed on NZX and/or the NZDX (“issuers”) are required to comply with the NZX Main Board/Debt Market Listing Rules. Rule 10.1.1(a) of the Listing Rules provides the continuous disclosure obligations of the NZX and NZDX.

[5] The FMA’s application to the Court has been prompted by the issues arising in the administration of CBL Corporation Ltd (CBL). CBL was put into administration on 23 February 2018. Neale Jackson and Brendan Gibson have been appointed as administrators. CBL has been dual listed on both the NZX and ASX since 12 October 2015.

[6] The administrators do not believe the continuous disclosure obligations under the Listing Rules apply to a company in administration. They argue that once a company is placed in administration its disclosure obligations are limited to those provided for under Part…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZHC 2052
Decision Date: 13 August 2018

CaseChat Overview and Summary

The Financial Markets Authority (FMA) sought the opinion of the Court on whether the disclosure obligations imposed by the NZX Main Board/Debt Market Listing Rules and the Financial Markets Conduct Act 2013 continue to apply to a listed issuer in voluntary administration under the Companies Act 1993. The FMA’s application was prompted by the administration of CBL Corporation Ltd, with Neale Jackson and Brendan Gibson as administrators. The administrators argued that the continuous disclosure obligations under the Listing Rules do not apply to a company in administration, and that their obligations are limited to those provided for under Part 15A of the Companies Act.

The Court found that the disclosure obligations do not continue to apply to a listed issuer that has been placed into voluntary administration. The Court held that the continuous disclosure provisions should be broadly construed to reflect the importance of continuous disclosure to participants in licensed markets, but that these provisions are suspended during the administration of a company under Part 15A of the Companies Act. The Court noted that the primary purpose of the continuous disclosure regime is to protect the integrity of trading in the market, which is not possible during an administration when trading in the company's shares is frozen. The Court concluded that the disclosure/reporting obligations of an issuer in voluntary administration are contained within Part 15A of the Companies Act, and that the continuous disclosure obligations are suspended during the administration. The Court’s decision was based on both policy and practical reasons, including the fact that the administration regime under Part 15A requires disclosure at certain defined statutory timeframes, and that the focus of the administration is on providing information to enable creditors to make the appropriate decision as to the company’s future.

The final orders of the Court were that the disclosure obligations do not continue to apply for a listed issuer that has been placed into voluntary administration, and that the continuous disclosure obligations of an issuer are suspended during its voluntary administration. The disclosure/reporting obligations of an issuer in administration are the disclosure/reporting obligations imposed by Part 15A of the Companies Act. The Court considered that costs should lie where they fall, but invited the parties to file memoranda if they took a different view.

Orders