Jan v New Zealand Institute of Chartered Accountants
[2021] NZHC 2056
•10 August 2021
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-175
[2021] NZHC 2056
UNDER Section 21 of the Insolvency Practitioners Regulation Act 2019 IN THE MATTER
of an appeal against a decision by the New Zealand Institute of Chartered
Accountants to decline an application made under section 9 of the Insolvency
Practitioners Regulation Act 2019 for the grant of an insolvency practitioner licence
BETWEEN
MOHAMMED TAZLEEN NASIB JAN
Appellant
AND
THE NEW ZEALAND INSTITUTE OF CHARTERED ACCOUNTANTS
Interested Party
Hearing: 26 July 2021 Appearances:
J K Mahuta-Coyle for the Appellant
S A Barker and B E Marriner for the Interested Party
Judgment:
10 August 2021
JUDGMENT OF COOKE J
(Leave to file evidence)
[1] By application dated 24 May 2021 the appellant seeks leave to file further evidence in relation to his appeal from the decision of the New Zealand Institute of Chartered Accountants (the Institute) declining him a license to act as an insolvency practitioner under the Insolvency Practitioners Regulation Act 2019 (the Act).
[2] The evidence which the appellant seeks to introduce is an affidavit sworn by him which describes the process that was followed by the Institute in making the
JAN v THE NEW ZEALAND INSTITUTE OF CHARTERED ACCOUNTANTS [2021] NZHC 2056
[10 August 2021]
decision under appeal. He sets out the reasons why he says that the process was unfair. He says he did not understand, and was not given a proper opportunity to address, the key factors that led to his application being declined. He then sets out evidence, including lengthy exhibits, which he said he could have provided to demonstrate why the application should have been granted.
[3] The Institute appears on the appeal as an interested party and formally abides by the decision of the Court, but at the same time it draws the Court’s attention to matters that would be relevant to the grant of leave.1
Nature of the appeal
[4] I understand that this is the first occasion where decisions under the Act have come before the Court. The Act is a new scheme that seeks to regulate insolvency practitioners. The object of the Act is to promote the quality, expertise and integrity of those practitioners.2 It is similar to an earlier voluntary scheme operated by Chartered Accountants Australia and New Zealand (CAANZ) and the Restructuring Insolvency and Turnaround Association of New Zealand (RITANZ). A key feature of the scheme is that insolvency practitioners now need to be licensed, with any insolvency practitioners who are not licensed unable to accept new insolvency assignments and having until 31 August 2021 to complete any existing assignments.
[5] Insolvency practitioners must be licensed under s 8 of the Act. Under s 9 to be so licensed a person must either be a member of the Institute, or come within s 57. Under s 22 the Registrar of Companies may prescribe minimum standards that must be met to obtain a license which become relevant to the assessment to be made under ss 57(1)(c) and 9(2)(a). Such standards were prescribed by the Registrar by notice dated 23 March 2020 entitled the Insolvency Practitioners Regulation Act (Prescribed
1 Under r 20.9 of the High Court Rules the Institute as the decision-maker must not be named as a respondent, but under r 20.17 it is entitled to be heard. There are recognised limits on the role that a decision-maker can play on appeal. But the Institute performs executive/administrative functions as well as adjudicative functions, and there was no opposing party involved when the matter was before it, or in this appeal. Given that it performs more than a purely adjudicative function it may be that its role on an appeal can involve an element of defending the decision, or at least explaining its perspective. But in doing so it would need not to compromise its role as impartial decision-maker.
2 Insolvency Practitioners Regulation Act 2019, s 3.
Minimum Standards, Conditions, and Requirements for Ongoing Competence, for Licensed Insolvency Practitioners) Notice 2020 (the Notice). It requires that the person either be a member of the Institute, or that s 57 applies in respect of that person, and also requires:
Experience in the provision of services
(b)The person:
(i)has at least five years of experience undertaking:
(A) work on insolvency engagements; or
(B) work that in the accredited body’s opinion is sufficiently similar to work on insolvency engagements; or
(C) any combination of work described in paragraph (A) and (B).
(c)The person:
(i)holds a CPP (or equivalent) and has completed at least 1,000 hours of work on insolvency engagements at a senior level within the 3 years immediately prior to applying for a licence under section 9 of the Act; or
(ii)does not hold a CPP (or equivalent) and has completed at least 2,000 hours of work on insolvency engagements at a senior level within the 3 years immediately prior to applying for a licence under section 9 of the Act.
(d)The minimum standards in paragraphs (b) and (c) do not apply if the person otherwise satisfies the accredited body that the person is competent to act as an insolvency practitioner.
[6] In the case of the appellant the two relevant requirements were that he had five years’ experience working on insolvency engagements or work that the Institute considered was sufficiently similar (or a combination), and that he had at least 2,000 hours working on insolvency engagements at a senior level within the three years immediately prior to applying for the licence.
[7] By application dated 31 January 2020 the appellant made application to the Institute. The Institute decided that he did not meet the prescribed minimum standards set in the Registrar’s notice in relation to the amount of previous experience in accordance with s 9(2)(a) of the Act. The Institute communicated its decision by letter dated 3 March 2021. This is the decision under appeal.
[8] Under s 21 of the Act there is a right of appeal to the High Court against this decision. There is no dispute that this is a general appeal under Part 20 of the High Court Rules 2016 to be conducted in the way explained by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar.3 The subject matter here involves the licencing of insolvency practitioners, and the particular decision focuses on the prior experience of the appellant by the reference to the number of years of experience, and hours performing particular roles, including whether particular functions were taken at a “senior level”. To that extent it can be seen as an appeal from a decision of a specialist body, but the Court is still required to consider the merits of the decision, and the merits of the appeal.
[9] The appellant’s notice of appeal dated 29 March 2021 includes challenges to the interpretation and application of the requirements in the Notice, but also includes what can be described as a natural justice complaint. The notice of appeal says that the Institute erred:
(b)by providing the Appellant with incorrect or insufficient particulars of the criteria upon which it would assess whether or not the Appellant has completed 2000 hours of work on insolvency engagements at a senior level (“assessment 2”); and then
(c)adopting different criteria for assessment 2 without providing the Appellant with an opportunity to demonstrate how he met those different criteria and, in fact, assuring him that no further information or explanation from him was required;
New evidence on appeal
[10] Section 21(3)(a) of the Act provides that an appeal to the High Court must be brought in accordance with the Rules of Court. Under r 20.16 of the High Court Rules a party to an appeal may only adduce evidence with leave of the Court. It provides:
20.16 Further evidence
…
(3)The court may grant leave only if there are special reasons for hearing the evidence. An example of a special reason is that the evidence relates to matters that have arisen after the date of the decision appealed against and that are or may be relevant to the determination of the appeal.
3 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
(4)Further evidence under this rule must be given by affidavit, unless the court otherwise directs.
[11] The principles relevant to determining whether further evidence will be admitted on appeal are well settled, and were summarised by Wylie J in B v A.4 The ultimate question is whether there are special reasons for receiving the evidence. Here we are dealing with an argument that the body appealed from breached the rules of natural justice. That particular reason for allowing further evidence to be admitted on appeal has been considered in the authorities. In the Foundation for Anti-aging Research v The Charities Registration Board the Court of Appeal said:5
[52] There may be other circumstances which could justify the exercise of the discretion to admit further evidence such as the correction of obvious factual errors or where natural justice requires. The latter might arise where, for example, the Board has taken matters into account to which the appellant did not have the opportunity to respond and which the court on appeal considers to be material to the determination of the appeal. We note in passing the existence of judicial review as an alternative means of challenging steps taken by the Board or the Chief Executive on natural justice grounds or for other procedural or legal error.
[12] In doing so the Court relied on its earlier decision in Commerce Commission v Woolworths Ltd where the Court referred to Telecom Corporation v Commerce Commission,6 and said:7
We recognise that where there has been neither a conference nor a draft determination (as in the present case), there may be slightly greater scope for the admission of new evidence on appeal (for instance to address unexpected points or to correct palpable misunderstandings). That said, we regard the passage we have just cited as broadly applicable in the present context. The High Court should be astute not to allow the appellate process contemplated by the Act and the High Court Rules “to be converted into a new trial”.
[13] I duly apply that approach in the present case. In doing so it seems to me that the application turns on two inter-related matters. The first is whether the appellant has an arguable case that the procedures followed by the Institute were not consistent with the principles of natural justice, and the second is whether the proposed evidence
4 B v A [2020] NZHC 580 at [25].
5 Foundation for Anti-aging Research v The Charities Registration Board [2015] NZCA 449, (2015) 4 NZTR 25-002, footnotes omitted.
6 Telecom Corporation v Commerce Commission [1991] 2 NZLR 557 at 558.
7 Commerce Commission v Woolworths Ltd [2008] NZCA 276, (2008) 12 TCLR 194 at [54].
is reasonably necessary to enable the appellant to advance that argument. If the appellant establishes those two matters I accept that special reasons may exist.
Is there an arguable case of breach of natural justice?
[14] There were no hearings before the Institute. When there are no hearings it is sometimes necessary for alternative processes to be followed to ensure fairness, and in particular to ensure that a party is able to address the matters that the decision-maker is basing the decision on. That can potentially be achieved by the effected person being given a proposed decision on which they are able to make submissions, but there are other ways of ensuring procedural fairness.
[15] Mr Mahuta-Coyle, and the appellant in his affidavit, set out why the appellant contends that the process followed by the Institute was procedurally unfair. When making the application to the Institute the appellant provided two documents. The first was a document that set out the number of hours he had engaged on particular insolvency related files, and the second was a table setting out the work he had engaged in at a senior level. He says that when advancing the application he did not understand that he had to set out the number of hours he had undertaken at a senior level as part of his second table, and that the subsequent communications with the Institute did not advise him of this (and that he was advised that he did not need to provide anything further).
[16]I see a number of difficulties with the appellant’s argument.
[17] First, I do not see that there was uncertainty with what the Notice contemplated, and what the appellant needed to put forward. There was no real complexity. The applicant needed to demonstrate five years’ experience working on insolvency engagements (or providing equivalent services) and then evidence that he had performed 2,000 hours experience working on insolvency engagements at a senior level. It was clear from that that he needed to put forward evidence of the number of hours that he was engaged at a senior level on insolvency engagements.
[18] In addition to the requirements being apparent from the Notice itself, there was a further document entitled “Application to become a Licensed Insolvency Practitioner
— Guide to Application Form”. That Guide addressed the work experience requirements, including by identifying the work that would be regarded as work at a “senior level”. This also appears to make clear what an applicant would need to put forward to satisfy the requirements.
[19] It is also relevant that the appellant had unsuccessfully applied under the previous voluntary scheme. The voluntary scheme did not include the five year experience requirement, but did include a requirement to have 2,000 hours of experience at a senior level. Having been previously declined under that scheme for failing to satisfy the criteria, it would have been clear that this was an issue that the appellant would need to address in his application under the Act.
[20] Moreover the appellant was sent a preliminary decision by the Institute in an email dated 20 October 2020. In the preliminary decision the Institute advised that it did not accept that the appellant had the five years’ experience required. The preliminary decision also then stated:
We consider you have undertaken at least 2,000 hours of work on insolvency engagements within the 3 years immediately prior to your application. However, we do not consider that 2,000 hours of this work would have been at a senior level as the Prescribed Minimum Standards require. The reasons for this are:
· We understand you have never been appointed as a liquidator or receiver. Although this is not decisive, it is a useful indicator of whether work has been undertaken at a senior level prior to the introduction of insolvency regulation; and
· As you had no practical insolvency experience prior to working at Liquidation Management Limited we expect that much of your initial experience at Liquidation Management Limited is not likely to be at the required senior level.
[21] The appellant was then given an opportunity to provide further submissions before a final decision was made by the Institute. Not only that but following receipt of the preliminary decision the appellant explains in his affidavit that he had interaction with the members of the Institute before the final decision was made. Before the decision the appellant duly provided further submissions. The appellant says that he was told he did not need to file anything further. But that was true in the sense that he did not need to file anything further for the Institute to properly assess
his application. This cannot be taken to have been an indication that he met the prescribed criteria. The preliminary decision advised the opposite.
[22] Given that background it is very difficult to accept that the appellant did not understand what evidence he needed to provide to obtain a license, or that there was uncertainty about the requirement to show the number of hours that he worked at the senior level on insolvency engagements (and that he had the relevant five years’ experience).
[23] In his proposed affidavit the appellant says that on 22 October, after he received the preliminary decision, he discussed the position with Mr Craig Neill of the Institute. He says that Mr Neill did not discuss what would constitute senior level experience, or tell him to “provide a breakdown of work hours in accordance with the factors described in the Guide”. He said that had he known that the Institute would “essentially disregard” the tasks described in his Table in its assessment of senior level work, he would have prepared evidence of his work experience to demonstrate he had “undertaken the requisite number of senior level hours”. He then describes the work that he says he performed, including a schedule of approximately 69 pages in spreadsheet form of the clients, dates he worked for those clients, and the number of hours he says he worked on those matters for them at a senior level.
[24] It is very difficult to accept the arguments in the appellant’s affidavit. On the evidence I have seen it seems apparent from the outset that the appellant would need to provide evidence of the number of hours that he performed work at a senior level. Moreover this is only the second of the requirements.8 The appellant also needed to demonstrate the five years’ work experience. The final decision communicated by the letter dated 3 March 2012 summarises the reasons for the decision were that the appellant:
· Only have approximately three years practical insolvency experience or sufficiently similar work on insolvency engagements; and
8 I note that the appellant’s affidavit suggests that five years’ experience, and 2,000 hours of work are alternative pathways. I agree with Mr Barker that that does not appear to be the case. They both need to be satisfied.
· Although you have demonstrated that you have undertaken more than 2,000 hours of work on insolvency engagements you have not demonstrated that you have undertaken 2,000 hours at a senior level; and
· Are not currently “otherwise competent” to act as an insolvency practitioner and therefore not eligible to apply for a licence under the alternative pathway. This is because you have only been involved in insolvency work for approximately 3 years and have not had sufficient time, experience or training to develop the necessary competence and experience to act as a licensed insolvency practitioner.
[25] The appellant’s best argument is that he has since obtained the analysis undertaken internally by the Institute which assessed why it did not accept that the evidence he had provided established the requisite five years’ experience and 2,000 hours work at a senior level. The appellant was not provided that level of information, including at the preliminary decision stage. But notwithstanding that he was not provided with that analysis, I accept that the Institute did appear to explain what the appellant was required to provide by way of evidence to demonstrate he met the criteria. It is accordingly very difficult to see that the appellant has an arguable case there was a breach of natural justice.
Is the affidavit reasonably required?
[26] Even if there is an arguable case of breach of natural justice, the appellant’s proposed affidavit does not seem to me to be reasonably necessary in order for him to advance any argument in this respect.
[27] As I understand it the documents that were before the Institute when making its decision will form part of the decision-making record in the case on appeal. That will include documents such as the application form, the Guide, what the appellant submitted, the preliminary decision, what the appellant then put forward in response to the preliminary decision, the Institute’s analysis, and the final decision. That will include the key documents that are needed to assess the appellant’s breach of natural justice argument.
[28] What would not be before the Court would be the appellant’s assertions in his affidavit that he did not understand what he needed to provide, and then the additional evidence that he said he would have provided had he properly understood what was
required. As to his assertions, they seem to me to be in the nature of arguments rather than evidence. His counsel can make those assertions on his behalf on appeal. As to the 160 pages of spreadsheets in the schedule, and the description of the work to which the schedule relate, I am far from convinced that this would have real relevance to this Court on appeal. The Court may not be in a position to make its own assessment on whether the hours the appellant asserts he undertook is properly regarded as work at a senior level. It may not be in a position to engage in the kind of forensic exercise of the kind that appears to be contemplated, even though it exercises a general appeal function. If the appellant is able to establish a breach of natural justice or other form of error, the appropriate course would more likely be for the High Court to remit the matter to the Institute for reconsideration.
[29] I am not satisfied that the proposed evidence is sufficiently material to establish special reasons to receive it, even if an arguable case of breach of natural justice existed.
Conclusion
[30] As Wylie J indicated in B v A the standard for admitting new evidence is “rightly high”, and it is “exceptional rather than routine”.9 That standard can be met if the appeal involves a question of a breach of natural justice, but as the Court of Appeal said in Commerce Commission v Woolworths the High Court should be astute not to allow the appellate process to be converted into a new trial.10 That appears to be what the appellant is seeking to do here. He is seeking to present evidence to the High Court to demonstrate he meets the criteria that have been prescribed. That might be permissible if he could establish there is an arguable case that the principles of natural justice were not met as it was not made clear what he needed to provide in order for the application to be assessed. But I find it difficult to accept that there is even an arguable case that this is so, or that his proposed evidence is needed to advance that argument.
9 B v A, above n 4, at [25].
10 Commerce Commission v Woolworths, above n 7.
[31] For these reasons I am not satisfied that special reasons to admit the proposed evidence exist.
[32]The application is dismissed.
Cooke J
Solicitors:
Langford Law, Wellington for the Appellant
Buddle Findlay, Wellington for the Interested Party
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