Re Henderson
[2017] NZHC 474
•16 March 2017
THIS JUDGMENT CONTAINS REDACTIONS
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2010-409-000559 [2017] NZHC 474
UNDER the Insolvency Act 2006 and
IN THE MATTER
of 18 applications by DAVID IAN HENDERSON to be involved in company management
DAVID IAN HENDERSON Applicant
Hearing: 17 February 2017
(Further written submissions: 7 March 2017)
Representation:
D I Henderson (Applicant) in person
Judgment:
16 March 2017
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
[on applications for permission (s 299 Insolvency Act 2006)]
Re Henderson [2017] NZHC 474 [16 March 2017]
CONTENTS
Introduction [1]
Restrictions from engaging in business after bankruptcy [3]
The statutory regime [3] The prohibition [5] The rationale of prohibition [7] The reasons for Mr Henderson’s prohibition [10] The Court’s approach to permission under s 299 Insolvency Act [21] The discretion under s 299 [21] Comparison with s 382(1) Companies Act [23] The protective purpose of prohibition/disqualification [24] The deterrent purpose of prohibition and the maintenance of business standards [29] Relevant considerations on an application for permission [34] Particular considerations [40] The purpose of protection [40] The purpose of deterrence and the maintenance of business standards [41] The onus (once a prohibition is in place) [42] Demonstration of continued protection [45] Deficiencies leading to prohibition – the applicant’s unfitness [49] Consequences of deficiencies [51] Applicant’s comprehension of unfitness and acceptance of the need for prohibition [52] Applicant’s subsequent conduct (for better or worse) [55] Structure of the identified entity [57] The business and financial performance of the entity [62] Definition of the applicant’s intended role in the entity [65] Risks associated with applicant’s intended role [68] The applicant’s needs [72] Third parties’ needs [81] View of relevant authorities [84] Identification of safeguards/conditions [87] Procedural and evidential requirements [93] Relevant considerations – my summary [97] (A) Over-arching considerations [97]
(B) Relevant considerations [97]
(C) Procedural and evidential requirements [97]
Mr Henderson’s applications for permission [98] Eighteen applications [98] Conduct in relation to which Mr Henderson requires permission [103] The entities’ governance and management structures and contractual arrangements [106] Examination of applications [112] BC 434940 [113] The Body Corporate [113] Conduct for which permission sought [117] Conclusion [125] The other 17 applications [127] The concepts of “management or control” [130] The absence of a contradictor [132] Case management of future occasions [135] Absence of procedural rules [135] The Court’s case management approach and Mr Henderson’s response [136] Discussion [143] Suppression [149] Orders [153]
Introduction
[1] David Ian Henderson was adjudicated bankrupt on 29 November 2010. He was not automatically discharged from bankruptcy in the usual way because the Official Assignee objected. Following a public examination, Mr Henderson was discharged from bankruptcy from 27 January 2017. The Court, on discharging Mr Henderson from bankruptcy, placed comprehensive business restrictions upon him, under s 299 Insolvency Act 2006 (the Act), for a period of six years (“the
prohibition”).1
[2] Mr Henderson has now filed 18 applications for permission to be involved in the management or other activities of 12 entities which would otherwise be precluded under the prohibition.
Restrictions from engaging in business after bankruptcy
The statutory regime
[3] When the Court concludes the public examination of a bankruptcy in relation to discharge,2 the Court has under s 298 of the Act power to order or refuse discharge and, if ordering discharge, to impose conditions.
[4] Under s 299 the Court, upon an order of discharge, may restrict the bankrupt from engaging in business after discharge. Section 299 provides:
299Court may restrict bankrupt from engaging in business after discharge
(1) The court, when it makes an order of discharge or at any earlier time, may prohibit the bankrupt after discharge from doing any or all of the following things without the court’s permission:
(a) entering into, carrying on, or taking part in the management or control of any business or class of business:
(b) being a director of any company:
(c) directly or indirectly being concerned, or taking part, in the management of any company:
1 Havenleigh Global Services Ltd v Henderson [2016] NZHC 2969 [the discharge judgment].
2 Under s 295 Insolvency Act 2006.
(d) being employed by a relative of the bankrupt:
(e) being employed by a company, trust, trustee, or incorporated society that is managed or controlled by a relative of the bankrupt.
(2) The court may—
(a) prohibit the bankrupt for a specified period, or without a time limit:
(b) at any time vary or cancel the prohibition.
The prohibition
[5] In the discharge judgment, the Court:
(a) discharged Mr Henderson from bankruptcy from 27 January 2017;
(b) imposed a condition as to Mr Henderson’s not entering into personal
guarantees; and
(c) imposed a restriction (until 9 December 2022) from engaging in business after discharge under each of the limbs of s 299(1) of the Act (the prohibition).3
[6] Accordingly, under s 299(1) of the Act, Mr Henderson requires the Court’s
permission to undertake any of the otherwise prohibited activities.
The rationale of prohibition
[7] Prohibitions of persons from managing or being directors of companies may arise or be imposed in the context of both personal and corporate insolvency. Counterparts to s 299 of the Act are to be found in ss 382, 383, 385 and 385AA Companies Act 1993, which variously provide for automatic disqualification (s 382), disqualification imposed by the Court (s 383), or by the Registrar of Companies or the Financial Markets Authority (ss 385 – 385AA).
[8] In Davidson v Registrar of Companies, the High Court dismissed an appeal from the decision of a Deputy Registrar to ban Mr Davidson from managing companies for a period.4 Miller J examined the legislative history and policy behind s 385 Companies Act.5 His Honour followed earlier authorities from both New
Zealand6 and Australian authority.7 His Honour concluded:8
Prohibition is aimed not at remedying wrongs done to shareholders and creditors of the insolvent company but at protecting the public from unscrupulous or incompetent directors in future, deterring others, and setting appropriate standards of behaviour. At the same time, any given director or manager inevitably experiences prohibition as a punishment; it is an adverse consequence of an enquiry into his or her involvement in an insolvent company.
[9] I respectfully adopt that passage as also applicable to the policy underlying s
299 Insolvency Act. It accords with the approach identified by Asher J in Kelly v Structured Finance Ltd, which I adopted in the discharge judgment.9 His Honour said:10
The public interest is best approached from the perspective of protecting the public from the insolvent debtor. The issue is not the punishment of the debtor, but avoiding the risk of further conduct to the detriment of the community, in particular in this case the commercial community.
The reasons for Mr Henderson’s prohibition
[10] In the discharge judgment, I concluded my analysis with a consideration of an interest-based approach to discharge.11 I found that the public and community interest would not be adequately protected by the unrestricted discharge of Mr Henderson from bankruptcy.12
[11] I rejected parts of Mr Henderson’s evidence in which he had expressed
pessimism for his future gaining of the financial or other support necessary for the
4 Davidson v Registrar of Companies [2011] 1 NZLR 542.
5 At [87] – [103].
6 First City Corporation v Downsview Nominees Ltd [1989] 3 NZLR 710 (HC) at 766.
7 Rich v Australian Securities & Investments Commission [2004] HCA 42, (2004) 220 CLR 129.
8 At [91].
9 Kelly v Structured Finance Ltd [2009] 2 NZLR 785.
10 At [63].
11 The discharge judgment, above n 1, from [390].
resumption of the activities of the nature he was involved in between his first and second bankruptcy. I found that it was likely that Mr Henderson would so engage.13
[12] The number of present applications, involving 12 (entities most of whose business interests date back to before Mr Henderson’s second bankruptcy and are closely related to him), bears out the Court’s conclusion that it was likely that Mr Henderson would again have the opportunity to be involved in such activities (if not restricted).
[13] In the discharge judgment, the Court also referred to the potential for Mr
Henderson to become an employee:
[411] Equally, Mr Henderson has not adduced evidence of any particular difficulty he would encounter in making himself available in an employed, consultancy role to provide vision to existing organisations or to assist in the development of the vision of new organisations. There is no evidence to suggest that the skills he has are not transportable into an employed situation or one in which he and his family interests have no direct financial involvement and control. In short, Mr Henderson has not adduced such evidence as might indicate that a prohibition under s 299 of the Act would stand in the way of a meaningful and rewarding contribution to the business life of the community.
[14] In reaching the conclusion in the discharge judgment that the prohibition was appropriate, the Court took into account a substantial body of evidence as to Mr Henderson’s previous governance and management approaches.
[15] Matters which weighed with the Court in relation to Mr Henderson’s
governance and management practices can be grouped under a number of headings:
(a) Substantial personal shortcomings in relation to company management and administration;
(b)As Chief Executive Officer, a failure to have in place a fully functioning support structure, compounded by a tendency to override others’ responsibilities and decisions;
(c) The use of personal guarantees, unbacked by personal assets, in order to support borrowing by limited liability companies; (d)
A failure to respond appropriately to the insolvency of companies and particularly prioritising the keeping of insolvent companies running;
(e)
Neglecting statutory requirements upon companies;
(f)
Arranging companies’ affairs so as to avoid paying tax, thereby
building up tax debts which he and associated companies could not satisfy; (g)
Diverting GST and PAYE collected by one company to another so that the Inland Revenue Department (IRD) did not receive it;
(h)
Moving money between closely controlled companies to achieve such purposes at (f) and (g) above;
(i)
Failing to return to the IRD substantial income for the period 1 April
2010 to 31 March 2012;
(j)
Refusing to recognise the authority or reasoning of rulings and established liabilities; and
(k)
Stonewalling in the face of liquidators’ and receivers’ lawful demands for documents and information.
[16]
The
evidence at the public examination clearly established that Mr
Henderson’s skills in and approach to administration and management were poor.
Such was reflected in Mr Henderson’s own evidence that:
… I’m a lousy administrator and so one of the key focuses for me going forward, if I was ever to be involved with business again at any level, would be to ensure that I had appropriate people around me to deal with administrative tasks that I’m no good at…So we could say it would be, it would be strong support in terms of the administrative/bureaucratic end of it.
[17] As noted in the discharge judgment, Mr Henderson’s self-assessment was closely reflected in the assessment of him by Garry Moore, a former Mayor of Christchurch. He described Mr Henderson’s conduct thus, “These are the actions of somebody who has admitted that his management may have been shambolic with poor recording of his actions”.14
[18] A particularly concerning aspect of the evidence relating to Mr Henderson’s management of businesses lay in the fact that his unfitness, both in directorial and executive roles, resulted in part from intentional behaviour on his behalf rather than as an unintended consequence of his personal approach.
[19] The factual findings contained in the discharge judgment are taken to be correct as res judicata.15
[20] Pursuant to the interest-based approach, it will be for the applicant who seeks permission under s 299 to satisfy the Court that the public and community interest which informed the decision to impose on Mr Henderson a six-year business restriction will continue to be adequately protected if the Court grants the permission sought.
The Court’s approach to permission under s 299 Insolvency Act
The discretion under s 299
[21] The provisions of s 299 do not expressly identify considerations which should inform the grant or refusal of permission.
[22] The Court accordingly has a discretion which on the face of the provision is unfettered.16 That said, broad considerations have emerged from the cases decided
in relation to cognate legislation.
14 The discharge judgment, above n 1, at [135].
15 The fact that Mr Henderson is pursuing an appeal of the discharge judgment does not stay the judgment: r 12(2)(c) Court of Appeal (Civil) Rules 2005.
16 See also Re Dawes & Henderson (Agencies) Ltd (No 2) [1999] 2 BCLC 317 at 326.
Comparison with s 382(1) Companies Act
[23] Section 382(1) Companies Act prohibits certain persons from being a director of or managing companies, while preserving to the Court the power to grant leave to the person to be involved in the management of a company. It therefore has a parallel function to s 299 Insolvency Act. Section 382(1) Companies Act provides:
382 Persons prohibited from managing companies
(1) Where—
(a) a person has been convicted of an offence in connection with the promotion, formation, or management of a company (being an offence that is punishable by a term of imprisonment of not less than 3 months); or
(b) a person has been convicted of an offence under any of sections 377 to 380 or of any crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961,—
that person shall not, during the period of 5 years after the conviction or the judgment, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company, unless that person first obtains the leave of the court which may be given on such terms and conditions as the court thinks fit.
…
The protective purpose of prohibition/disqualification
[24] In the absence of authorities as to the granting of permission under s 299 of the Act, it is appropriate to consider the substantial body of authority in relation to s
382(1) Companies Act and its disqualification provisions.
[25] Considerations of community interest and protection loom large in judicial discussions regarding applications for leave under s 382(1). Because of the rationale of prohibition, such considerations are central but stand as part of a broader consideration.
[26] In Ramsay v Sumich, Sinclair J identified and adopted a number of authorities
in relation to the Court’s consideration.17 His Honour observed:18
17 Ramsay v Sumich [1989] 3 NZLR 628 (HC).
The protective element of the legislation is referred to in Morison’s Company
Law, para.17.05B19 which states as follows:
“A prohibited person under either the automatic or Court imposed restraint may apply for leave to become an officer of a company. The purpose of the Section is to protect the public against use of a corporate structure contrary to proper commercial standards and not as additional punishment. A person seeking leave bears the onus of establishing that the general policy of the Legislature ought to be made the subject of an exception. Relevant matters include the nature of the disqualifying offence, the nature of the applicant’s involvement, his general character and his conduct in the intervening period since his disqualification. The Court should also consider the structure of the companies that the applicant wishes to become involved in; the nature of their business; the interest of the shareholders, creditors and employees; and the risk to the public which may appear to be involved in permitting the applicant to assume positions on the board or in management.”
To the same effect is the decision in New South Wales, in Re Magna Alloys
& Research Pty Ltd,20 where Bowen CJ in Eq referred in his judgment to the equivalent provision as follows:
“It is designed to protect the public and to prevent the corporate structure from being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company. In its operation it is calculated to act as a safeguard against the corporate structure being used by individuals in a manner which is contrary to proper commercial standards.”
Later on the same page he had this to say:
“The Court in exercising its discretion will have regard to the nature of the offence of which the applicant has been convicted, the nature of his involvement, and the general character of the applicant, including his conduct in the intervening period since he was removed from the board and from management. Where, as here, the applicant seeks leave to become a director and to take part in the management of particular companies the Court will consider the structure of those companies, the nature of their businesses and the interests of their shareholders, creditors and employees. One matter to be considered will be the assessment of any risks to those persons or to the public which may appear to be involved in the applicant’s assuming positions on the board or in management.”
Similar statements can be found in Re Zim Metal Products Pty Ltd and Re
Van Reesema.21
18 At 632.
19 Equivalent passage now contained in Morison’s Company Law (online looseleaf edition, LexisNexis) at [23.9].
20 Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203.
21 Re Zim Metal Products Pty Ltd (1977) 2 ACLR 553 and Re Van Reesema (1975–76) CLC 40-
209.
[27] In his submissions, Mr Henderson characterised the interests to be protected as “broad and rather abstract notions”. While they indeed involve broad considerations, the interests involved can be identified in specific examples, driven by findings as to the bankrupt’s past conduct. So, for instance, where a bankrupt diverted tax payments so as to avoid a company’s tax obligations, a particular interest to be protected is the due collection of revenue. Where there was insolvent trading, those to be protected are others who deal with an entity in which the bankrupt may take a governance, management or financial decision-making role, as well as those who are interested (whether as shareholders, employees or creditors) in the entity in which the bankrupt becomes involved. Mr Henderson, having described such interests as “broad and rather abstract”, submitted that they must be “tempered by the purposes of the Act”. For these purposes, Mr Henderson invoked (as he had in his submissions on the public examination) the third reading speech of the Minister, the Hon. Lianne Dalziel. Mr Henderson submitted that the “critical aspect” is that bankruptcy proceedings are to be dealt with swiftly, giving the bankrupt the opportunity to go out and to be actively entrepreneurial once again. Mr Henderson submitted that the legislation was not in any way intended “to quash entrepreneurial activity”.
[28] With some important qualifications, Mr Henderson’s submission as to the importance which the legislature recognised of not suppressing entrepreneurialism is correct. But the qualifications are crucial in the context of a bankrupt whose conduct has been adjudged (under s 299 of the Act) to render him, for a period after bankruptcy, unfit to be involved in any board or management role without permission of the Court. As the cases to which I refer in this judgment recognise, the s 299 prohibition is not to be relaxed unless the risks associated with the bankrupt’s conduct are avoided in the structuring of the intended role. To that extent, the pursuit of an applicant’s entrepreneurial skills may have to take second place to the right of the public and the community to protection. It is also the case that the deterrent purpose of prohibition (to which I now turn) may require that the applicant be restrained from engaging in entrepreneurial activity of the breadth and/or unrestricted nature to which he or she may aspire.
The deterrent purpose of prohibition and the maintenance of business standards
[29] When a bankrupt is restricted under s 299 of the Act, there is a public interest in protection. This goes beyond that section of the public who may be involved in a particular company or in potential dealings with the former bankrupt and form the most obvious group to be protected. There is also a public interest in deterrence.
[30] This dual consideration of public interest is identified in Sir Andrew Park’s
judgment in Re Morija plc (Morija), where his Lordship explained:22
[33] The purpose of a disqualification order or undertaking is not to punish the director for his misconduct. Rather it is to protect the public. Partly it does that by restricting the ability of the person concerned to expose the public to the risk of loss from further misconduct on his part. It is worth adding that the possible further misconduct does not have to be of the same nature as that which has led to the disqualification: see observations of Lloyd J in the Stern case, Re Westminster Property Management Ltd (No 2).23 The observations were cited (appropriately so, in my judgment) by Registrar Jaques in the present case. Partly a disqualification order or undertaking achieves its purpose of protecting the public by deterring other directors from misconduct which might lead to disqualification proceedings against them. It also seems to me that the existence of the disqualification jurisdiction can have a beneficial effect in the form of maintaining and improving standards of integrity on the part of businessmen who become directors of companies.
[31] This combined approach – prohibition to protect and deter and also to set appropriate standards of behaviour – is also identified by Miller J in Davidson v Registrar of Companies which I have set out at [8] above. I respectfully adopt it.
[32] I have located in the New Zealand cases only a single suggestion that the Court ought not to take deterrence into account on a leave application. It appears in the judgment of Asher J in Re Weston in the sentence “Protection of the public is the
object, and not punishment or deterrence”.24 No authority is cited as to the
22 Re Morija plc, Kluk v Secretary of State for Business, Enterprise and Regulatory Reform [2007] EWHC 3055 (Ch). See also Secretary of State for Trade and Industry v Collins [2000] 2 BCLC
223 at 281, per Peter Gibson LJ; “… deterring future misconduct by the disqualified director and other directors, and so encouraging higher standards in corporate management”. See also Chew v NCSC (1985) 9 ACLR 527 per Olney J at 530; “…the only conclusion one can draw in the total context of the Code is that this provision is inserted for the purpose of either deterring would be offenders or for protecting the public from exposure to persons who have offended and who might re-offend if not restrained or (as I think is more likely) both”.
23 Re Westminster Property Management Ltd (No 2) [2001] BCC 305 at 359–360.
24 Re Weston HC Auckland CIV-2006-404-773, 18 August 2006 at [19].
“deterrence” element. By reason of the underlying policy and the other authorities to which I have referred, I respectfully decline to follow the Re Weston observation as to deterrence.
[33] The correct approach is concisely summarised by Barker J (in the Federal Court of Australia) in Carey, re Carey where his Honour identified the legislative policy under three heads:25
· The legislative policy is one of protecting the public, not one of punishing the offender;
· Another objective is to deter others from engaging in conduct of the particular kind in question; and
· A further objective is the more general one of deterring others from abusing the corporate structure to the disadvantage of investors, shareholders and others dealing with a company.
Relevant considerations on an application for permission
[34] In the discharge judgment I had regard (when imposing s 299 restrictions) to a list of matters identified by Sinclair J in Ramsay v Sumich as relevant to the consideration of whether to grant leave to a convicted person to be involved in the management of company under what was s 188A(1)(b) Companies Act 1955 (now substantially re-enacted as s 382 Companies Act 1993). His Honour’s 14
considerations were:26
(1) the protection of the interests of the public from injury; (2) the interests of creditors;
(3) the interests of shareholders;
(4) the interests of company employees; (5) the interests of investors;
25 Carey, re Carey [2011] FCA 235 at [31].
26 Ramsay v Sumich, above n 17, at 633.
(6) (the interests of other persons who have dealings with the company; (7) the nature of the disqualifying offence;
(8) the nature of the applicant’s involvement;
(9) the general character of the [applicant];
(10) the conduct of the [applicant] during the intervening period since disqualification;
(11) the nature of the business that the [applicant] desires to or has become involved with;
(12) the structure of the company;
(13) the risk of or actual injury to the public;
(14) whether or not leave was sought to become involved in the management of the company and whether as a director or otherwise.
[35] In the discharge judgment, I observed:27
Sinclair J provided his list in the context of prohibitions under the Companies Act. While some of the matters identified have a focus on an application for leave to be involved in a specified company, they are for the most part considerations which may be taken into account whenever the Court has before it the possibility of a business prohibition.
[36] In the Australian jurisdictions (as in New Zealand), disqualifications may arise in the context of statutory provisions dealing with either personal insolvency or the affairs of companies/corporations. The Australian courts, in considering leave to disqualified persons, have drawn on decisions in both contexts. An early decision identifying relevant considerations in relation to an undischarged bankrupt was Re Ferrari Furniture Co Pty Ltd (Ferrari).28 Subsequently, Australian decisions as to the granting of leave to disqualified directors under corporation law statutes have consistently applied similar considerations.
[37] In Magna Alloys & Research Pty Ltd (Magna Alloys), Bowen CJ in Eq. dealt with an individual who had been, under New South Wales law, automatically disqualified from being a director of or taking part in the management of
companies.29 The individual applied for leave to be a director of and to take part in
27 The discharge judgment, above n 1, at [14].
28 Re Ferrari Furniture Co Pty Ltd, [1972] 2 NSWLR 790, at 792.
29 Magna Alloys & Research Pty Ltd, above n 20.
the management of five companies. In relation to the jurisdiction to grant leave, his
Honour referred to authority (including Ferrari) and observed:30
The court in exercising its discretion will have regard to the nature of the offence of which the applicant has been convicted, the nature of his involvement, and the general character of the applicant, including his conduct in the intervening period since he was removed from the board and from management. Where, as here, the applicant seeks leave to become a director and to take part in the management of particular companies the court will consider the structure of those companies, the nature of their businesses and the interests of their shareholders, creditors and employees. One matter to be considered will be the assessment of any risks to those persons or to the public which may appear to be involved in the applicant's assuming positions on the board or in management.
[38] In Adams v Australian Securities and Investments Commission (Adams) Lindgren J, by reference to much authority, summarised the legal principles arising when certain convicted persons, automatically disqualified under federal law from managing corporations, apply for leave to manage corporations.31 His Honour stated:
[8] The following principles relevant to an application of the present kind have been consistently recognised and applied in the authorities:
(1) The applicant bears the onus of establishing that the court should make an exception to the legislative policy underlying the prohibition: [referring to 11 authorities].
(2) That legislative policy is one of protecting the public, not one of punishing the offender: [referring to 8 authorities].
(3) Another objective is to deter others from engaging in conduct of the particular kind in question: [referring to 5 authorities].
(4) A further objective is the more general one of deterring others from abusing the corporate structure to the disadvantage of investors, shareholders and others dealing with a company: [referring to 6 authorities].
(5) The prohibition itself contemplates that there will be hardship to the offender. Therefore hardship to the offender alone is not a persuasive ground for the granting of leave: [referring to 3 authorities].
30 At 205.
31 Adams v Australian Securities and Investments Commission [2003] FCA 557, (2003) 46 ACSR
68.
(6) The court in exercising its discretion will have regard to the nature of the offence of which the applicant has been convicted, the nature of his involvement, and the general character of the applicant, including his conduct in the intervening period since he was removed from the board and from management. Where, as here, the applicant seeks leave to become a director and to take part in the management of particular companies the court will consider the structure of those companies, the nature of their businesses and the interests of their shareholders, creditors and employees. One matter to be considered will be the assessment of any risks to those persons or to the public which may appear to be involved in the applicant’s assuming positions on the board or in management, [referring to 2 authorities].
[39] Subsequently, in the New Zealand decision of Re Weston, Asher J dismissed an application for leave under s 382 Companies Act.32 His Honour referred to Ramsay v Sumich33 and Re Minimix Industries Ltd34 (and “various Australian decisions”). The exercise which the Court undertakes was identified by his Honour in this way:
[8] The fundamental question that the Court must ask is whether the
public will be at risk if leave is granted …
[9] Weight can be given to the personal position of the applicant, and any hardship to him or third parties. However, this is to be balanced against the primary object of protecting the public. The Court is unlikely to be particularly swayed by circumstances particular to an applicant, that might otherwise provoke sympathy, if the public remains at clear risk. The exercise that the Court carries out is different from a sentencing exercise. Protection of the public is the object, and not punishment or deterrence. Factors personal to an offender that might persuade a Court to impose a lesser penalty may not be persuasive if the public remain at significant risk. Even if innocent third parties may suffer as a consequence of leave not being granted, this may not prove persuasive. The Court still has an overriding concern that the public are protected. The Court may consider the business history of the applicant to see whether fraud or losses to the public are a feature of that business history. The Court will also look at the most recent conduct of the applicant. That is also relevant to see whether the qualifying offending is likely to reoccur. In the end the Court must look forward and consider whether the applicant has satisfied it that there is an acceptable prospect of rectitude on the part of the applicant or, to put it the other way, no unacceptable risk of misconduct.
32 Re Weston, above n 24.
33 Above n 17.
34 Re Minimix Industries Ltd (1982) 1 NZCLC 98,381.
Particular considerations
The purpose of protection
[40] The New Zealand authorities (including Ramsay v Sumich), the Australian authorities (including Magna Alloys), and the United Kingdom authorities (including Morija) consistently recognise that the purpose of disqualification is not to punish the individual for misconduct but rather to protect the public.
The purpose of deterrence and the maintenance of business standards
[41] The decisions in Davidson v Registrar of Companies and in United Kingdom and Australian cases (such as Carey, re Carey) also consistently recognise that deterrence and the maintenance of appropriate business standards are important purposes of prohibition orders. The policy objectives include:
· deterring others from engaging in the particular conduct; and
· deterring others from utilising corporate structures to the disadvantage of investors, shareholders and others dealing with the company.
The onus (once a prohibition is in place)
[42] Business restrictions are extraordinary responses to extraordinary circumstances. They are imposed because, notwithstanding due regard for the individual’s interests, proper protection of other interests is required.
[43] The onus on an application for leave under s 382 is accordingly upon the applicant.35
[44] An application of the present nature is not to be treated in a perfunctory manner. At the first call, when I enquired of Mr Henderson whether he would be calling evidence or making submissions, he described his application in relation to
Body Corporate 434940 as “straightforward”. That statement was in the context of
35 Ramsay v Sumich, above n 17, at 631, following Re Minimix Industries Ltd, above n 34. For
Australia, see Re Altim Pty Ltd and Companies Act 1961 [1968] 2 NSWR 762 (NSWSC) at 764.
Mr Henderson’s indication that he anticipates filing as many as 100 applications on an annualised basis. With the present group of 18 applications filed very soon after his six-year restriction was first imposed, an impression is created that Mr Henderson does not comprehend the justification for or the importance of the restrictions or the onus he bears when making this application. The Court did not
impose the restrictions lightly. It will not lightly remove them.36 A due
consideration of authority and a thorough consideration of the application and the evidence filed in support is required.
Demonstration of continued protection
[45] The application proceeds on the basis that the prohibition was reasonably required for the purpose of protection. The bankrupt has been found unfit to be engaged in the prohibited activities and roles. Permission to become engaged in managing a company’s affairs, being director of a company, or being employed by a relative by its nature has the potential to erode such protection.
[46] The Courts have consistently recognised that permission (or leave) should be granted only if the Court is satisfied that the intended protection will still be achieved. In other words, permission will not be granted unless the applicant demonstrates that the various interests intended to be protected will not be significantly less protected if the permission or leave is granted.
[47] That approach is reflected in the passage from the judgment of Asher J in Re Weston set out above at [39]. The importance of avoiding risk to the public was similarly identified by Jaine J in Re Focas where his Honour observed, on review of the authorities:37
At the forefront of the discretion [to grant leave] is the need to protect the public and to prevent the corporate structure being used to the prejudice of the public or a section of the public.
36 Re Ferrari Furniture Co Pty Ltd, above n 28, at 792C: “a fetter which is not to be lightly put
aside by the Court”.
37 Re Focas (1993) 6 NZCLC 68,417, [1992] MCLR 515 at 12.
[48] A like test was applied by the Federal Court of Australia in Re Shneider.38 In granting leave to the applicant to take part in the management of a company (other than as a director), Drummond J recorded his conclusion that:39
… there is no reasonable likelihood of Mr Shneider re-offending, given his previous unblemished record. In coming to that view, I also take into account his involvement in business life in the period between commission of the offences over seven years ago and now. I do not see that there is any risk of any harm to any relevant public interest if some relaxation of the ban is permitted.
Deficiencies leading to prohibition – the applicant’s unfitness
[49] In the context of some Companies Act provisions the applicant is disqualified through committing an offence or offences. The relevance of the “nature of the disqualifying offence” is then identified as an obviously relevant consideration, as in Sinclair J’s list of considerations in Ramsay v Sumich.40 The point was articulately identified by Sir Andrew Park in Morija where his Lordship observed:41
[35] In the balancing process the degree of seriousness of the misconduct on the part of the disqualified person who is applying for leave is relevant. The relevance seems to me not to rest on the notion that, if a person’s misconduct has been serious enough, a refusal of leave serves him right. Rather the point is in part that, in the case of a person who has misconducted himself seriously in the past, the risk to the public of him misconducting himself again if he is granted leave is greater than would exist in the case of a person whose misconduct was less serious. A different aspect of the same point is that, if a disqualified director whose conduct has been significantly bad is seen by others to have been granted leave by the court to continue as a director of another company, the deterrent effect on other directors will be weakened.
[50] Sir Richard Scott VC in Re Barings plc (No 4), Secretary of State for Trade and Industry v Baker (No 4) (“Re Barings No 4”) similarly identified the relationship between an applicant’s past defects in company management and the need to avoid a
recurrence.42 His Lordship stated:43
38 Re Shneider (1996) 142 ALR 129 at 131.
39 At 131.
40 Ramsay v Sumich, above n 17, at 633. See also Re Magna Alloys & Research Pty Ltd, above n
20 at 205; and Adams v Australian Securities and Investments Commission, above n 31, at
[8](6).
41 Re Morija plc, above n 22.
42 Re Barings plc (No 4), Secretary of State for Trade and Industry v Baker (No 4) [1999] 1 BCLC
262 (Ch. D.).
43 At 269.
The court in considering whether or not to grant leave should, in particular, pay attention to the nature of the defects in company management that led to the disqualification order and ask itself whether, if leave were granted, a situation might arise in which there would be a risk of recurrence of those defects.
Consequences of deficiencies
[51] The damage caused to the public or a section of the public by the applicant’s conduct may have been disproportionate to the turpitude of the applicant’s misconduct or deficiencies. The extent of financial or other damage caused by the applicant’s deficiencies is appropriately a matter which further informs the risk associated with the applicant’s involvement in management or board activities.
Applicant’s comprehension of unfitness and acceptance of the need for prohibition
[52] In Ramsay v Sumich, Sinclair J identified the general character of the applicant as a relevant consideration.44 The most relevant aspect of the applicant’s character is likely to be that which informs the Court’s perception of the applicant’s ability and willingness to avoid “reoffending”. So, in relation to disqualification based on criminal offending, the Courts will take into account whether the disqualifying offence was a departure from an otherwise impeccable or worthy career, or a recurrent feature.45 In relation to other deficiencies, the applicant’s comprehension of his or her deficiencies and the risks flowing from them may assume more importance.46
[53] The significance of an applicant’s failure to come to grips with the seriousness of past conduct and its consequences was illustrated in the concluding paragraphs of Asher J’s judgment in Re Weston, when dismissing Mr Weston’s application.47 His Honour concluded:
[40] I consider that in all the circumstances Mr Weston has not discharged the onus on him to persuade the Court that he can function as a director or manager without danger to the public. The fact that particularly influences me is his lack of comprehension of what he did wrong, and unwillingness to address this. This is exemplified by his lack of frankness in
44 Ramsay v Sumich, above n 17, at 633.
45 See for instance Re Focas, above n 37.
46 See Re Shneider, above n 38, at 131.
47 Re Weston, above n 24.
his affidavits, and his lack of explanation of the matters of concern raised in his probation report. He shows a tendency to try and use money as a way to absolve himself of blame, rather than to accept blame. I am left with insufficient confidence that he has learned his lesson. It remains entirely possible that he will be guilty of business misconduct in the future.
[41] I have reached this decision after considerable deliberation, as Mr Weston has ability as a businessman, and has not been shown to have been fraudulent. It may be that if he can come to see his past wrong doing, and provide more satisfaction to the Court that he has addressed the demons that lead to his past misconduct, he could succeed in discharging the onus that is on him. For this reason I specifically give him leave to re-apply in the future.
[54] In Duffy; Re Westgate Ports Pty Ltd, Gordon J similarly identified “any acknowledgement of wrongdoing and co-operation by the applicant” as a relevant factor.48
Applicant’s subsequent conduct (for better or worse)
[55] Sinclair J, in Ramsay v Sumich, identified the conduct of the applicant during the intervening period since disqualification as a relevant consideration.49 This is consistent with the approaches of Australian and English courts.50
[56] The applicant’s subsequent conduct is relevant to the Court’s assessment of the risk of a recurrence of earlier conduct – the central aim of prohibition being protection. Subsequent conduct may accordingly be relevant if the type of conduct points to a reduction of the risk of recurrence of particular conduct which led to the prohibition. The Court does not focus on evidence of good conduct for the different purpose of assessing a punishment by regard to mitigating factors – given that the s
299 prohibition does not have a punishment role, the applicant’s subsequent good conduct does not constitute relevant mitigation. Its relevant role arises where it points to a reduction of risk.
Structure of the identified entity
[57] The authorities recognise the need for full information as to the structure of the company or other entity involved.51 Such information will assist the Court’s
48 Duffy; Re Westgate Ports Pty Ltd [2010] FCA 608 (2010) 79 ASCR 267 at [19](5)(iii).
49 Ramsay v Sumich, above n 17, at 633.
50 In Australia, see Adams v ASIC, above n 31, at [8](6). In England, see Westmid Packing Services
Ltd [1998] 2 All ER 124, at 134b.
assessment of that entity’s ability to deal with the characteristics of the applicant which contribute to the unfitness.
[58] In the English decision Re Dawes & Henderson (Agencies) Ltd (No 2), Sir Richard Scott VC was led to grant leave to a disqualified director to be a director of a company because it had unlimited liability (distinguishing the situation from intended involvement in a limited liability company which may have constituted a very difficult application).52 Similarly, in Australia it has been treated as relevant that the company is a private or proprietary company (as against a company which invites public subscription for its shares).53
[59] A further consideration in relation to structure will be whether the company has the same structure or is the very same company as that with which the applicant was involved previously and gave rise to the disqualification.54
[60] The Court will also consider the up-to-date directorial and management structure of the company, and the extent to which it has or will have others as qualified and experienced directors and/or managers alongside or in supervision of the applicant (if granted permission). A relevant enquiry, when the applicant’s past conduct has involved financial mismanagement or the like, will be as to the financial controls within the company structure both in terms of day to day transactions and financial reporting. The Court will want to have established the answer to the question of “who has the real control?”
[61] The central relevance of the consideration of the company structure is in the Court’s assessment of any risks to the public or sections of the public which may appear to be involved in the applicant’s assuming a position on the board or in the
management of the company.55
51 See Ramsay v Sumich, above n 17, at 633; Duffy; Re Westgate Ports Pty Ltd, above n 48, at
[19](5)(vi); and Re Jarrett [1999] FCA 503, at [8].
52 Re Dawes & Henderson (Agencies) Ltd (No 2), above n 16, at 327. See Ferris J’s discussion of
Re Dawes & Henderson (Agencies) Ltd (No 2) in Secretary of State for Trade and Industry v
Collins, above n 22, at 238.
53 See Re Shneider, above n 38, at 133 line 25; Re Jarrett, above n 51, at [8].
54 Re Jarrett, above n 51, at [8].
55 Re Magna Alloys & Research Pty Ltd, above n 20, at 205. See also Re Marsden (1981) 5 ACLR
694; Pace v Australian Securities and Investments Commission (1999) 17 ACLC 1674.
The business and financial performance of the entity
[62] The Court will consider, alongside the structure of the entity, the nature of the business in which it engages or intends to engage,56 and how that relates to the types of business previously affected by or implicated in the applicant’s unfit conduct.57
The Court will also consider the financial and trading position of the company, its financing arrangements, any dependence on inter-company advances or shareholder support, and any speculative aspect of its trading. Slicer J, in Hosken v Australian Securities and Investments Commission, applied Sir Nigel Bowen’s conclusions in
Magna Alloys. 58 His Honour identified particular risks associated with one of the
companies which were the subject of an application:59
The current financial circumstances of the company, the contingent nature of the intended transaction with Bleasel, the former nature of the loan structure linked to the applicant or entities with which he is associated, and the previous conduct of the applicant require the court to ensure that the public is not put at risk from the activity of a person who has been shown to lack the required level of conduct (Re Australian Limousin Breeders Society Ltd).60 Continued unconstrained managerial power afforded the applicant could pose such a risk.
[63] In relation to a second company involved in the application, Slicer J
continued:61
The capacity to transfer monies between associated companies. or those with common management, requires trust in those exercising financial power. The level of profit enjoyed by Tasmania Distillery might result in pressure to allocate some portion of it, by loan or otherwise, to preserve the viability of another entity. The remaining director of Tasmania Distillery is the sister of the applicant who, it would appear, possesses little advanced managerial skill and might not be able to ensure sufficient control of conduct.
[64] The Court found that the application for leave to manage the two companies ought to be refused (but, pursuant to established authority, granted interim
conditional leave to manage the companies pending an appeal).
56 Re Ramsay v Sumich, above n 17, at 633. In Australia, see Adams v ASIC, above n 31, at [8](6).
57 Re Magna Alloys & Research Pty Ltd, above n 20, at 205. See also Re Marsden above n 55; and
Pace v Australian Securities and Investments Commission, above n 55.
58 Hosken v Australian Securities and Investments Commission (1998) 28 ACSR 542 (TSC).
59 At 546.
60 Re Australian Limousin Breeders Society Ltd (1989) 7 ACLC 426.
61 At 546 – 547.
Definition of the applicant’s intended role in the entity
[65] The Court looks to the applicant to define the specific role to be performed in the entity. In the context of s 299 of the Act, the application will be for permission to have the role of director to be involved in management, or to be an employee of a relative. Specific detail of the role’s responsibilities is required. A convenient way of producing such evidence is in the form of a proposed employment contract in which there is a specific job description and identification of responsibilities and duties. Such a definition (of manager’s duties) was evidently provided in Re
Minimix Industries Ltd as Cook J set out the list of 13 specific duties.62 There should
also be identification of those to whom the applicant will report and those over whom the applicant may have managerial responsibility. The precise definition of the applicant’s intended role is important also to indicate the workability and enforceability of any permission granted. If permission is sought in relation to a particular role, conditions of permission may be required to properly identify that role. A potential problem with conditions was identified in Secretary of State for Trade & Industry v Collins by Ferris J, who observed that “…conditions, if imposed, may be of such a nature that they are all too easily disregarded and almost
impossible to police”.63
[66] The Court will consider where the applicant sits in terms of the actual control of the company.64 In Pace v Australian Securities & Investments Commission, Murray J declined an application for leave to be a director of two companies but granted the applicant leave to take part in the management of the companies.65 The applicant (Pace) had built up the subject companies. Through his family trust he controlled 54 per cent of the company equity. The main company employed about
60 people. Its board had an independent chairman with no shareholding (described as “an eminent citizen of this State with extensive business experience… of the highest character”). The two other board members were the company’s production manager (holding 18 percent of the equity) and the company’s accountant (holding the
remaining 28 percent of equity).
62 Re Minimix Industries Ltd, above n 34.
63 Secretary of State for Trade & Industry v Collins, above n 22, at 239.
64 See for instance Re Marsden and the Companies Act, above n 55.
65 Pace v Australian Securities & Investments Commission, above n 55.
[67] Murray J had regard to the degree of control which the applicant would be able to exercise over the subject company. His Honour found that there would be relatively little risk that the applicant’s participation in the companies as their General Manager would jeopardise the companies, or those interested in, employed by or dealing with them. His Honour found that there was no other public interest
requiring a refusal of the management application.66 His Honour noted the
protection that would be afforded through the fact that the applicant, as General Manager, would be subject to the guidance and control of the board whose decisions he would be able to influence by his advice but would not be able to participate directly in.67
Risks associated with applicant’s intended role
[68] The Court will examine any risk involved in the granting of permission by reference to the conduct of the applicant which caused the Court to impose the prohibition.
[69] One risk lies in the reducing of the protective element of prohibition.
[70] In Ramsay v Sumich, Sinclair J identified specifically “the risk of or actual injury to the public”.68 In Re Minimix Industries Ltd, Cook J had referred more generally to “the interests of the public”, identifying sections to the public whose interest may be exposed.69 His Honour there stated:70
Clearly there is a substantial onus on an applicant to demonstrate that his case is such as to warrant leave being granted as an exception to the general rule and, while one readily accepts that the section is not a punishment, in deciding whether or not leave should be granted one must have concern for the interests of the public, i.e. those who have dealings with the company and are entitled to find that they are dealing with persons of integrity; those who become creditors and are entitled to expect that the funds of the company are not dissipated by dishonest action; no doubt shareholders also, who have delegated the management of the company to the directors and those in the company's employment. In the present case, however, the interest of the latter may be set aside. There are three shareholders only of whom the applicant is one; of the others, the major shareholder strongly
66 At [28].
67 At [29].
68 Ramsay v Sumich, above n 17, at 633.
69 Re Minimix Industries Ltd, above n 34.
70 At 98,382.
supports the application and I understand that the third, with the smallest holding, did not object. Accordingly, it is a question of those who have dealings with the company as creditors or otherwise.
[71] A second risk lies in the weakening of the deterrence elements of prohibition, with the possibility that granting permission to be involved in directorial or managerial duties or to be employed by a relative will detract from the maintenance of appropriate business standards.
The applicant’s needs
[72] In Morija, Sir Andrew Park spoke of the balancing process which a court undertakes when a leave application is made. His Lordship identified two “needs”:71
In favour of a grant of leave is the ‘need’ criterion: the need of the disqualified director to earn a living, and (a different matter, and usually more important) the need of some other person, typically another company, to have his services.72
[73] An applicant should, if relying on personal need or hardship, provide evidence of financial circumstances and of the proposed remuneration which will not be available if permission is not granted to take the role.
[74] In Chew v NCSC Olney J identified a similar weighting of the interests of others ahead of the applicant’s own interest.73
[75] The Court considers an application for permission under s 299 of the Act against the background of the discharge judgment. That judgment held that, due to the bankrupt’s unfitness, the balancing of interests required that the Court impose the s 299 restrictions upon the bankrupt (notwithstanding that hardship to the bankrupt would ensue). The relevance of the fact that the prohibition has been imposed in the first place was highlighted in the judgment of Yates J in Re Watts, where his Honour
stated:74
71 Morija, above n 22, at [34]. See also Chew v NCSC, above n 22, at 531 – 532.
72 Chew v NCSC, above n 22, at 531 – 532.
73 Chew v NCSC, above n 22, at 531 – 532.
74 Re Watts [2011] FCA 1185, (2011) 86 ACSR 221 at [20].
It should also be noted that hardship, in the form of disqualification, is not, alone, a persuasive ground for granting leave…75 This is because that particular form of hardship is implicit in the legislative prohibition. The legislative policy of protecting the public, reflected in the prohibition itself, remains in the forefront of considerations: Altim;76 see also the cases cited in Adams at [8].
[76] In his Honour’s judgment in Re Weston, Asher J elaborated upon the Court’s assessment through the balancing exercise in a passage to which I have already partly referred. His Honour identified in particular to the weight to be attached to issues of hardship:77
Weight can be given to the personal position of the applicant, and any hardship to him or third parties. However, this is to be balanced against the primary object of protecting the public. The Court is unlikely to be particularly swayed by circumstances particular to an applicant, that might otherwise provoke sympathy, if the public remains at clear risk. The exercise that the Court carries out is different from a sentencing exercise. Protection of the public is the object, and not punishment or deterrence. Factors personal to an offender that might persuade a Court to impose a lesser penalty may not be persuasive if the public remain at significant risk. Even if innocent third parties may suffer as a consequence of leave not being granted, this may not prove persuasive. The Court still has an overriding concern that the public are protected.
[77] Given my differing view as to the relevance of deterrence (above at [32]), I respectfully add to his Honour’s observations that the Court is also concerned to ensure that the restrictions imposed upon the applicant continue to have a deterrent effect and to act as an encouragement in the maintenance of appropriate business standards.
[78] To the extent the Court considers assertions of personal hardship (whether for the applicant or others), the Court will examine whether the applicant could have taken a role as a (supervised) employee without requiring leave.78
[79] As a bankrupt who is restricted under s 299 of the Act retains the right to obtain employment other than as a director or manager (and except, if restricted
75 See Adams, above n 31, at [8]; Chew v National Companies and Securities Commission, above n
22, at 528–30; Re Maelor Jones Pty Ltd (1975) 11 SASR 322 at 231, 1 ACLR 4 at 13; and
Murray v Australian Securities Commission (1993) 12 ACLC 11 at 14.
76 Re Altim, above n 35, at 764.
77 Re Weston, above n 24, at [9].
78 Secretary of State for Trade & Industry v Collins above n 22, at 231f.
under s 299(1)(d) – (e), in a relative’s business or company), the Court will take into account the right the applicant has to seek employment. This was illustrated in Stone J’s judgment in Platcher v Joseph where His Honour observed:79
It would not, however, prevent him from earning a living and from using such skills in the financial area as he made possess. It would mean that he would have to be supervised by someone who was permitted to manage a corporation and who would have the responsibility for Mr Platcher’s conduct.
[80] An applicant who asserts that an employed role would be insufficient or unsatisfactory needs to provide evidence of the reason.
Third parties’ needs
[81] As seen in the judgments of Sir Andrew Park (in Morija) and Olney J (in Chew v NCSC), the Court is likely to place greater emphasis on the needs of the company (and upon the interests of the company’s shareholders, employees and creditors) rather than those of the applicant.
[82] In Re Focas, Jaine J was satisfied on the evidence that the involvement of the applicants in the subject companies, in the terms in which leave was sought, was necessary for their continued operation and development of a group of small private companies.80 On the other hand, in Re Ansett, Brooking J refused the application notwithstanding evidence that the North Melbourne AFL Club needed the applicant’s skill and experience on the board.81 The Judge concluded that the Club might in future be involved in large capital raising, a situation in which the applicant ought not to be involved.
[83] In short, the cases illustrate that the need for the company (and related persons) to have the applicant’s services has to be clearly established on the evidence. Even when established, it may be insufficient to adequately guard against
other risks. Asher J carried out an assessment of hardship in relation to the applicant
79 Platcher v Joseph, [2003] FCA 9, 44 ACSR 277.
80 Re Focas, above n 37 at [16].
81 Re Ansett (1990) 3 ACSR 357.
and “innocent third parties” in Re Weston.82 In that case, his Honour observed that the needs of the applicant and the company may be unpersuasive.
View of relevant authorities
[84] Later in this judgment I make an observation as to the absence of a contradictor on the present application, there being no express statutory requirement of service upon any other party under s 299 of the Act.
[85] In Australian and British legislation, the provisions vary as to whether a particular authority is required to be served and/or needs to enter an appearance. Relevant authorities will be entitled to appear and their views will be considered in the light of the evidence. In Australia, the attitude of the Commissioner for Corporate Affairs has been held to be a relevant consideration in relation to the application of bankrupt to serve as a director.83
[86] The same approach is appropriate in New Zealand where the Registrar of
Companies has been presented as acting in the public interest rather than as a party.84
Identification of safeguards/conditions
[87] In many of the cases where the Courts have granted leave or permission, the grant has been found to be appropriate in part because of safeguards or conditions built into the permission.
[88] In the New Zealand decision in Hattie v Registrar of Companies,85 Williams J granted the applicant leave under s 382 Companies Act to be appointed as a director on three conditions, being that:
(a) the company appoint an auditor;
82 Set out above at [39].
83 Re Ansett, above n 81, at 359, line 12.
84 Re Weston, above n 24, at [3].
85 Hattie v Registrar of Companies (2000) 8 NZCLC 262,152 at [6] – [8].
(b)the auditor provide to the Registrar of Companies twice yearly an audit certificate confirming that in the Auditor’s opinion the business of the company is being properly run in accordance with the company’s obligations and that the proper books of account are being kept; and
(c) a sealed copy of the Court’s order be lodged on the company’s file (in
the Companies Office).
[89] In Re Minimix Industries Ltd, the Court made an order granting leave on condition that the applicant would not have cheque signing authority.86
[90] The authors of Company Directors – Duties, Liabilities and Remedies have brought together examples of conditions imposed by English courts when granting leave under the Company Directors Disqualification Act 1986:87
An order under s 17 gives leave only in respect of one or more specified companies, and may be subject to quite stringent conditions, tailored to the circumstances of the particular case. Examples have included: a requirement that a named person remained a director with voting control, a requirement that a chartered accountant act as a co-director, a ban (among other conditions) on signing cheques without a counter-signature, a ban on loans to an associated company, a requirement for prompt settlement of the company’s debts and for regular management accounts to be prepared, and restriction to performance in a subordinate capacity. The court may grant leave for a time in order for specific acts to be carried out. (Case references and citations omitted).88
[91] As recognised by Asher J in Re Weston, it may be appropriate that when granting any permission the Court makes provision for the withdrawal of permission in the event of a breach of conditions.89
[92] It is appropriate that there be attached to an application a draft of the order containing the precise terms which the applicant seeks including any conditions
86 Re Minimix Industries Ltd, above n 34.
87 Simon Mortimore (ed) Company Directors – Duties, Liabilities and Remedies (2nd ed, Oxford
University Press, Oxford 2013) at [31.162].
88 For similar lists, see Austin, Ford & Ramsay’s Principles of Corporation Law, (online looseleaf ed, LexisNexis) at [7.200.42]; and Morison’s Company and Limitation Law, above n 19, at [23.9].
89 Re Weston, above n 24, at [10].
which the applicant (and the directors or chief executive of the subject company)
accept as appropriate.
Procedural and evidential requirements
[93] There is repeated reference, particularly in the Australian authorities, to the need for the applicant to put before the Court specific proposals and evidence as to the intended involvement as a director or manager of a specified company or companies.90 The Court in Re Watts refused an application for leave to manage 13 companies because the applicant had not adduced evidence as to the management of the companies; the role that he would have played or intended to play in the management of the companies; and why it was necessary for him in particular to be involved in the management of each company.91
[94] The considerations which have weighed with the New Zealand courts in relation to s 382 Companies Act (and with Australian courts in relation to their companies and corporations law) are appropriate considerations on a bankrupt’s application under s 299 Insolvency Act.
[95] There is, however, one point of distinction between the disqualifications which arise in personal insolvency law (s 299 Insolvency Act) and corporate law (such as under s 382 Companies Act). In the s 382 situation, the disqualification has arisen automatically as a result of conviction for specified offences. In that situation, the Court will not have been called upon in a prior judgment to exercise a discretion as to disqualification based upon findings in relation to the individual’s conduct. On the other hand, in the context of the Insolvency Act and in any particular restrictions imposed under s 299, the restrictions have been imposed because the Court has on evidence found them to be necessary to protect the community and public interest
against aspects of the bankrupt’s conduct.
90 See, for instance, Platcher v Joseph, above n 79. See also (in relation to similar legislation in the United Kingdom) Secretary of State for Trade and Industry v Collins, above n 22, per Peter Gibson LJ at 229. The application for leave should be supported by clear evidence as to the increased role which the applicant would play in the company or companies in question, and up- to-date and adequate information about that company or companies.
91 Re Watts, above n 74, at [29].
[96] That stated, the considerations which may appropriately inform the exercise of the discretion are similar to those which inform the initial decision to impose business restrictions under s 299 of the Act.92
Relevant considerations – my summary
[97] I adopt from the authorities which I have reviewed the following as considerations which arise when permission is sought under s 299 Insolvency Act:
(A) Over-arching considerations
(a) The starting point is that the prohibition was imposed not as punishment but for the purposes of:
(i) protection (particularly of the public); (ii) deterrence; and
(iii) maintenance of appropriate business standards;
(b)The applicant bears the onus of showing that the restrictions should not apply to the particular work; and
(c) To gain permission, which by its nature may cut across such protection and undermine such deterrence, the applicant must demonstrate that the interests intended to be protected will not be significantly less protected if permission is granted.
(B) Relevant considerations
(a) Deficiencies leading to prohibition – applicant’s unfitness;
(b) Consequences of deficiencies;
92 A similar observation was made in Re Westmid Packing Services Ltd, above n 50, at 134C, where Lord Woolf MR observed that the considerations which inform the appropriate period of disqualification under s 6 Company Directors Disqualification Act 1986 may also be relevant on an application by the disqualified person under s 17 of the Act (for leave to be a director, manager, etc of the company).
(c) Applicant’s comprehension of deficiencies and acceptance of the need for the prohibition;
(d) Applicant’s subsequent conduct (for better or worse); (e) Structure of the identified entity;
(f) Business and financial performance of the entity; (g) Definition of applicant’s intended role in the entity; (h) Risks associated with applicant’s intended role;
(i) Applicant’s needs;
(j) Third parties’ needs;
(k) View of relevant authorities; and
(l) Identification of safeguards/conditions.
(C) Procedural and evidential requirements
(a) The application should clearly identify the company or other subject entity, its structure and business, the role the applicant seeks to take, and any measures proposed to be implemented to eliminate risks for other interests; and
(b)The applicant should also adduce evidence capable of satisfying the Court that an exception should be made to the policy considerations underlying the prohibition.
Mr Henderson’s applications for permission
Eighteen applications
[98] Mr Henderson has filed 18 applications, supported in each case by an identical affidavit which, after brief introductory comments, sets out:
… the individual entities in respect of which each application relates and the details of the business of each entity that is currently being undertaken or intended to be undertaken.
[99] The affidavit does not refer to one of the companies for which Mr Henderson wishes to work (Lichfield Ventures Ltd).
[100] The entities identified are then in Mr Henderson’s affidavit set out under headings “A” – “R”.
[101] As several of Mr Henderson’s applications relate to one entity, I set out the entities identified in Mr Henderson’s documents (with reference to the companies’ alphabetical listings in the affidavit) as follows:
· Body Corporate number 434940 (BC 434940)(A);
· FTG Securities (FTG) (CLMQ) (no application filed for Q);
· GP96 Ltd (GP96) (IJ);
· Grace Motor Works Ltd (Grace) (F);
· Lichfield Ventures Ltd (Lichfield) (no affidavit reference);
· Odeon Property Holdings Ltd (Odeon) (B);
· RFD Finance Ltd (RFD) (R);
· So Systems Ltd (So) (NO);
· St Asaph Investments 2011 Ltd (St Asaph) (K);
· Tomanovich Holdings Ltd (Tomanovich) (E);
· WTG Investments Ltd (WTG) (D);
· 100 Investments Ltd (100 Investments) (GHP) (no application filed for P).
(As identified above, in some cases no application was filed in relation to a matter covered in the affidavit: in other cases, applications were duplicated).
[102] In summary, Mr Henderson intended to apply for permission to be involved as a director and/or in the management of 12 entities.
Conduct in relation to which Mr Henderson requires permission
[103] By the discharge judgment, Mr Henderson is prohibited from engaging in any of the five limbs of conduct identified in s 299(1) Insolvency Act 2006.
[104] If permission is granted to Mr Henderson pursuant to his 18 applications, the nature of the applications is such that the Court will be permitting conduct in each instance under at least one of the following sub-sections:
·Section 299(1)(a) – entering into, carrying on, or taking part in the management or control of a business;
· Section 299(1)(b) – being a director of a company;
·Section 299(1)(c) – directly or indirectly being concerned, or taking part, in the management of a company;
·Section 299(1)(e) – being employed by a company that is managed or controlled by a relative of Mr Henderson (his wife, Kristina Buxton).
[105] The single sub-section under which permission is not sought is s 299(1)(d). That is because all the entities identified by Mr Henderson are bodies corporate, so that any employment relationship Mr Henderson has will not be directly with a relative.
The entities’ governance and management structures and contractual arrangements
[106] In his applications, Mr Henderson did not identify the governance and management structures of the various entities for which he wishes to work. Nor did he identify the particular arrangements which each entity would have in place for his work.
[107] The Court therefore issued a Minute before the first call of the applications. In that Minute, the Court observed:
It is not indicated what the current management structure is or what the continuing management structure will be (apart from Mr Henderson’s proposed involvement in it).
The Court would be assisted by having printouts from the Companies Register recording the current directorship of each company. The Court would also be assisted by evidence as to the current executive/ management/decision-making structure. The Court would further be assisted by evidence from a relevant director and/or executive of each company as to that person’s continuing role and the particular contractual arrangements, job description and the like which would be entered between the company and Mr Henderson.
[108] At the first call of nine of his applications (the second set of nine applications being filed later), Mr Henderson provided the Court with printouts of the details of each company as recorded on the Register of Companies. Mr Henderson said that he did not intend to file further evidence in support of his applications. I nevertheless extended to him a further period in which to file any additional evidence. I referred him again to the subject-matter identified in my earlier Minute. I asked Mr Henderson to consider again whether he wished to adduce evidence of such matters.
[109] At the first call, Mr Henderson expressed concern that delay in the Court’s determination of his applications was affecting his income. I observed to him that to that point he had not provided any evidence as to his income arrangements or expectations.
[110] In the event, Mr Henderson filed one further affidavit. It dealt with his income expectations. I now set out in full the body of the affidavit:
1.I am swearing this affidavit as a supplementary affidavit in support of multiple applications, with respect of various entities, that I have filed and will be filing; pursuant to paragraph [446] of the judgement of Associate Judge Osborne dated 9 December 2016.
2.For the sake of efficiency, this affidavit, like the earlier affidavit in respect of my applications, is intended to cover all the initial applications I intend to make. This number is exactly 18 applications.
3.The need for this affidavit has arisen as a consequence of issues raised at the first call in respect of my applications.
INCOME:
4.At the first call of this matter I had raised the issue that all of these applications relate directly to my ability to earn an income. Associate Judge Osborne, presiding, was critical of the fact that I had provided no evidence that these applications relate to earning income.
5.At the moment I earn no income. I consider that I am unable to earn income as a consequence of the prohibitions placed on me by virtue of a judgement of Associate Judge Osborne dated 9 December 2016.
6.My livelihood is considerably affected as a consequence of those prohibitions. My ability to earn income necessarily and unavoidably will involve me directly or indirectly in the management of a business, and/or businesses.
7.Over the last 6 years I have been regularly called upon by a variety of people and entities to assist them in a variety of tasks that I have knowledge and/or expertise in. With the approval of the Assignee, I have assisted those people in an extensive way. Much of this has related to issues stemming from the Christchurch earthquakes.
8.I have been able to assist family, friends and a significant number of others with insurance related issues, rebuilding and repair issues and other issues arising from the designation of properties by Cera. All of this has now had to stop as a consequence of the ruling of the Court of December 9 2016.
9. I now intend to charge for services because I need to and deserve to.
There is a strong demand for my services, skills and assistances.
10.I have a fundamental and quite natural desire to provide for and care for my family and to provide for my and their future and to improve my and their standard of living.
11. Over the last 6 years, whilst bankrupt, I have not been required to obtain approval, in the way the Court now requires, from any party to conduct the activities that I have conducted. I had approval from
the Assignee to be involved directly and indirectly with the management of businesses so long as I did not make the final financial decisions.
12.I have no ability whatsoever to provide the sort of services that I have provided successfully in the past unless I can make commitments to parties at short notice. I am therefore seeking the cooperation of the Court to be able to hear matters related to me as a matter of urgency in circumstances where I am seeking to make a commitment to a third party to assist them, directly or indirectly, in respect to management of their business. I am not able to provide prompt responses to requests for me to conduct commercial activities of this nature then my livelihood will be significantly
[111] Mr Henderson did not file additional evidence as to the matters set out in the Court’s earlier Minute (above at [107]) (other than the printouts from the Companies Register).
Examination of applications
[112] Against this background, I first turn to examine the application which Mr
Henderson identified as the most urgent, that in relation to BC 434940.
BC 434940
The Body Corporate
[113] Mr Henderson seeks permission to “be involved directly and/or indirectly
with the management of [BC] 434940 in respect of a number of issues [redacted]”.
[114] Implicitly (because he has applied for permission), Mr Henderson must recognise that his degree of involvement in each entity would (but for permission) breach at least one restriction imposed under s 299(1)(c) of the Act.
[115] In Mr Henderson’s evidence, before turning to the assistance he has given and intends to give to [BC] 434940, he identifies BC 434940 in a single sentence:
This Body Corporate relates to a property at 245 St Asaph Street.
[116] Mr Henderson has provided information through the Registry that one Darryl
Queen is Chairman of BC 434940.
Conduct for which permission sought
[117] Mr Henderson explains in his affidavit that he had been assisting BC 434940 for a number of years in resolving issues [redacted].
[118] The “business” identified by Mr Henderson in his affidavit is that of [redacted] and, thereby BC 434940 and the issues which arise for BC 434940 in relation to such [redacted]. The involvement in “the management of BC 434940” would be that involving the management of the issues so arising. Mr Henderson in his affidavit does not refer to [redacted].
[119] In order to consider permitting Mr Henderson to take part in the management of BC 434940, it is first appropriate to consider the current executive/management/decision-making structure. Mr Henderson has not provided information in relation to those matters, other than that a Mr Queen is the Chairman. Mr Henderson informed me, during submissions, that BC 434940’s management committee comprised owners.
[120] On this ground alone, it would be inappropriate on the present application to grant Mr Henderson the permission he seeks. The restrictions imposed in the discharge judgment were restrictions imposed in part because of Mr Henderson’s failings at both governance and executive levels. There is no evidence that the entity for which Mr Henderson would be providing a level of management, support, or control has a governance and executive structure that would reasonably ensure supervision of Mr Henderson’s conduct in his designated area by persons of demonstrated competence. There is no evidence of a structure wherein the company’s true decision-making is undertaken by others. The Court does not know whether BC 434940 has in place arrangements which leave Mr Henderson out of decision-making and control in relation to matters such as regulatory obligations.
[121] Mr Henderson has not provided a precise definition of the role which he would perform for the entity. In the Minute, I referred to matters a relevant director and/or executive of the entity might cover in providing evidence to the Court, including that “person’s continuing role and the particular contractual arrangements, job description and the like which would be entered into between the company and
Mr Henderson”. Given the findings in the discharge judgment, it would be inappropriate to consider granting Mr Henderson permission in relation to a role identified only in the most general way in Mr Henderson’s affidavit and in slightly expanded terms in the application itself. If Mr Henderson is to be granted permission to depart from any of the restrictions under s 299(1) of the Act, there needs to be a clearly documented identification of his role, responsibilities and level of authority.
[122] Mr Henderson’s evidence in relation to the [redacted] issue affecting 245 St Asaph Street is that he has been assisting that BC 434940 for a number of years in resolving issues. If that is so, an identification of the specific role and responsibilities should have been readily capable of expression.
[123] In his submissions, Mr Henderson explained the nature of management activities in which he would be involved for BC 434940 by reference to what he had been doing as a bankrupt while “tasked [by BC 434940] with dealing with [redacted]”. He said, by way of illustration, that he would make decisions about meetings, such as the times of meetings. It would then be for the Management Committee of BC 434940 to make what he described as “overall decisions”. I note the continuing vagueness in such explanations (provided in submission rather than evidence). They do not provide the Court with a clear understanding of the limits of Mr Henderson’s intended role. He clearly wishes to perform a negotiating role for BC 434940 but its scope is undefined in the application.
[124] These are matters on which the Court should reasonably look to the evidence of the person or persons who occupy the current senior governance or executive positions in BC 434940. In the Court’s Minute, I referred to the evidence of “a relevant director and/or executive of each company”.
Conclusion
[125] Inasmuch as the prohibition was imposed in the discharge judgment for reasons of public and community interest, I am not satisfied on the limited evidence filed that the public and community interest will be safe-guarded through a structure
and divisions of responsibility within BC 434940 which address Mr Henderson’s
unfitness (as identified in the discharge judgment).
[126] I am also not satisfied that the particular role, responsibilities and duties which Mr Henderson would have in working for BC 434940 are sufficiently defined to make the grant of permission appropriate.
The other 17 applications
[127] Mr Henderson, after addressing the BC 434940 application, made submissions on the remaining 17 applications (involving 11 companies). For the most part, the nature of the intended roles as explained by Mr Henderson is either to advise on or assist with business opportunities (variously property acquisition, resolution of insurance issues, property development and various aspects of land, machinery and intellectual property) and with the pursuit of litigation. The sole director of all but three of the 12 entities is Ms Buxton.
[128] All these other applications have shortcomings similar to the BC 434940 application. The type of information identified as missing at [119] – [124] above is missing also in relation to these other applications. I am equally unsatisfied on the basis of the information provided on those applications that the public or community interests will be provided if the applications are granted as they stand.
[129] The very way in which Mr Henderson has approached the present 18 applications adds a further level of concern for the Court when considering permission. The discharge judgment identifies the history of problems with Mr Henderson’s governance and management style – it is one of recurrent and serious incidents. Those matters were of central importance in the Court’s conclusion that a comprehensive six-year business prohibition was required. The extremely brief content of the present applications does not indicate that, even now, Mr Henderson truly recognises the issues of unfitness raised by his past conduct. The approach and content of his current documents suggest that he may be in denial. In his submissions, Mr Henderson went so far as to suggest that the discharge judgment does not itself identify specific issues of unfitness on the part of Mr Henderson other than in relation to his giving of personal guarantees. Mr Henderson appears to have
failed to read those extended parts of the judgment which deal with his shortcomings, including the summarised (bullet point) introduction at [152] of the discharge judgment.93
The concepts of “management or control”
[130] By reason of the insufficiency of evidence to support the present application and the lack of definition of the roles intended for Mr Henderson, it is neither necessary nor feasible that I consider what aspects of intended roles might be considered “management or control” and therefore require permission under s 299 of the Act.
[131] At the first call, Mr Henderson touched on the meaning of the term “management”. He indicated that he is working on the basis of a definition of “management” which was provided to him by the Official Assignee last year. If and when the concept of “management” becomes central to a decision which the Court must reach, the Court will at that point have regard to any submissions filed before identifying in its judgment the construction it adopts. I note for the time being that Thomas J has recently in Mani v Registrar of Companies set out her Honour’s answer to the question “What constitutes involvement in management of a
company?”94
The absence of a contradictor
[132] Neither the Act nor the High Court Rules prescribes the procedure to be adopted by a former bankrupt in seeking permission under s 299 of the Act. There are no provisions as to service of an application. This is in contrast to other statutory provisions. For instance, the applicant for leave under s 382 Companies Act must
give notice to the Registrar of Companies.95 Similarly, in overseas jurisdictions with
comparable statutory requirements, there are requirements of service upon relevant authorities.96 In the present case, the appropriateness of serving the Official
93 Also summarised above at [15].
94 Mani v Registrar of Companies [2016] NZHC 3002 at [81] – [96]; see also Commissioner for
Corporate Affairs (Vic) v Bracht (1988) 14 ACLR 728 (VSC) at 733 – 734, 736.
95 Section 382(2) Companies Act 1993.
96 Such as, in England and Wales, upon the Secretary of State for Business Enterprise and
Regulatory Reform or the Official Receiver, depending upon the case.
Assignee may be questionable, given Mr Henderson’s discharge from bankruptcy. On the other hand, Mr Henderson’s disqualification under s 299 is a matter required to be recorded in the Register of Companies, with the consequence that service on the Registrar may usually be appropriate. But even in situations where the Registrar is required to be served with similar applications, the Registrar might not take a step
in relation to the application.97
[133] In these circumstances, it appears to me that in an arguable case it would be appropriate that the Court direct that the Registrar of Companies be served. Failing a decision on the part of the Registrar to take any steps, the Court might then consider the appointment of counsel to assist the Court as a contradictor.
[134] I have refrained from embarking on such a course in relation to these 18 applications simply because I am satisfied that the applications, as presented, clearly fail to justify the granting of permission. In the event that there is filed an amended application which is properly particularised and supported by evidence raising arguable issues for consideration, it is likely that the Court would make directions for service and/or appoint counsel to assist.
Case management of future occasions
Absence of procedural rules
[135] Unsurprisingly, the Act does not provide direction as to the case management of applications for permission under s 299 of the Act. Matters of case management are for the Court, taking into account the allocation of judicial resource.
The Court’s case management approach and Mr Henderson’s response
[136] After Mr Henderson advised the Court that he still has many more applications to make, I issued a Minute on 17 January 2017 recording:
I confirm that where applications are being made for permission under s 299 in relation to a particular company, it is appropriate that there be a single application in relation to that company with, if involving more than one aspect of management, particulars of aspects of permission sought. That is
97 As, for instance, provided by s 382(3) Companies Act 1993.
likely to be the procedure which best secures the efficient disposal of the proceedings.
[137] The Minute continued:
A similar observation applies to any group of companies which are controlled by the same director/s or Chief Executive Officer. It would be appropriate in such cases in the application to identify the particular companies in relation to which management (or similar) permission is sought with, again, particulars of any identified aspects of management.
[138] As to case management, I recorded in response to a question raised by Mr
Henderson:
Mr Henderson enquired at the first call as to the urgency with which applications might be treated when they are filed. Mr Henderson suggested that they should be accorded a similar urgency and should be capable of speedy judgment in a similar way to interim injunctions.
I confirm that I indicated to Mr Henderson that the present applications are different in kind to interim injunctions which by their nature alter no substantive rights and preserve the position for a temporary period. The permission sought in relation to management is for ongoing permission.
Secondly, the Court will case manage applications as they are filed. It behoves any applicant to group applications in an appropriate way and, where possible, to file them before a matter becomes urgent. Where, as in relation to Body Corporate 434940 there is a demonstrated urgency, the Court will seek to accommodate that in the context of the Court’s other business.
The fact that Mr Henderson indicated a total of up to 100 such applications today would suggest that, at least in relation to all those matters, they are clearly identified already and can be brought together in an appropriate way which does not see the Court asked to deal with them piecemeal.
[139] Mr Henderson responded to that Minute by memorandum.
[140] In response to the Court’s observation that the permission Mr Henderson was seeking in relation to management was for ongoing permission, Mr Henderson responded:
… his Honour suggests that permissions I seek and/or will be seeking are “ongoing”. That is incorrect. At this time, permissions I seek are for specific involvements directly or indirectly with the management of business. They will all be of a temporary nature and will immediately terminate upon the completion of the involvement. In some cases, these permissions may have a life of a few hours. In some cases, they may need to be granted (or declined) within a 24 hour window.
[141] In response to the Court’s observation that Mr Henderson’s indication of a total of up to 100 applications (annualised) suggested that those matters had been clearly identified, Mr Henderson responded:
I do not believe that there is any statement I made to the Court that would provide a basis for that inference. The 100 number comes as a consequence of a reflection of my activities over the last 6 years, annualised, and in particular, my aspirations over this coming year and the number of people who have approached me, post-bankruptcy, wanting me to become involved with them or assisting them in some way or other.
At this time there is no clear identification as to what those applications might specifically be.
[142] In response to the Court’s confirmation that a single application would be appropriate in relation to particular companies, covering more than one particular aspect of management, Mr Henderson responded:
I am very concerned as to what is being proposed here. In particular, it would appear that I am being asked to group applications rather than have them treated on an individual basis.
Over the course of my public examination I was regularly criticised by both the Court and the Official Assignee for what they perceived as lack of specificity on my part in my past business dealings and for a failure to commit matters to writing and for expediency. It was also suggested to me that arrangements I enter into or agreements I undertake are often equivocal as a consequence of what was perceived as my way of operating.
I have deliberately attempted to avoid that with these applications by treating them individually and trying to provide a degree of specificity in respect of them but at the same time respecting confidentiality that is demanded of me. I have avoided being expedient.
I also do not consider that individual applications can be dealt with in the collective fuzziness of a group of applications all being bundled together.
Furthermore, I see the strong potential for an important matter to be held up because of issues surrounding a less important matter that has been grouped with the important one. Matter A could conceivably be dealt with on the papers, and urgently, whilst Matter B may require a hearing set some time out.
I also consider that there is a real opportunity for misunderstanding and for facts being blurred if a number of applications are bundled together.
Discussion
[143] Mr Henderson signals that he will be filing (by inference over coming years) dozens of applications. He envisages that he will continue to file what he refers to as “individual” applications for “specific involvement” in relation to businesses. He states that all will be of a temporary nature, immediately terminating upon completion of a particular involvement. He suggests that some may need to be granted or declined within a 24 hour window.
[144] Nothing advanced by Mr Henderson in his memorandum provides good reason for not grouping identified activities under a scope of permission in relation to particular companies. Nor is any compelling reason provided for not grouping within an application the companies which have common directors/executors.
[145] Mr Henderson raises issues of confidentiality (by inference as between the different entities) but such cannot be an issue where the governance or executive control is common to all entities. Furthermore, on the facts of the present 18 applications, when Mr Henderson swore a single affidavit covering his involvement with every entity, the inference is that each entity was prepared to have its information included in an omnibus affidavit covering all entities.
[146] Mr Henderson’s stated concern that he needs to file individual applications so as to provide “a degree of specificity” is unjustified and misconceived. If there is a danger that a group of applications bundled together will be dealt with “in a collective fuzziness”, it is a matter to be dealt with by the applicant in presenting and speaking to the applications. It is the everyday practice of practitioners in this Court and well within the ability of Mr Henderson to identify with particularity in a single document each application and the grounds upon which each application is based. The Court will ensure that each identified application is determined. As it is, the manner in which Mr Henderson filed 18 separate applications in this case has created rather than lessened confusion, with Mr Henderson overlooking the need for an application in relation to at least one company and in other cases filing duplicated applications. His choice to file 18 separate applications has not assisted the Court to follow his applications.
[147] Finally, Mr Henderson appears to have a misapprehension as to both the legislative expectation and the Court’s resourcing in relation to the manner in which permission might be granted (or declined). The relevant considerations which will inform the granting of permission are identified in the earlier part of this judgment. Each application is required to be considered in the light of those principles and upon any evidence filed. Parliament cannot have intended, when reserving to the Court the power to permit a former bankrupt to depart from the terms of a prohibition, to have the High Court involved in dozens of applications each year and in decision-making confined to a 24-hour window. It must have been the legislative intent that an applicant for permission gives far more thoughtful consideration to the scope of permissions he or she may need, keeps to a minimum the occasions on which the Court needs to consider such applications, and ensures that any application is filed well in advance of the anticipated need for the applicant to assume a particular management role.
[148] These are all straightforward matters of case management. These observations are set out not as directions but in order to provide information to Mr Henderson and those for whom he may wish to assume a management role of the approach to applications which the Court views as most likely to assist the proper determination of an application.
Suppression
[149] Mr Henderson informed me that those involved with the various entities for which he wishes to work (including BC 434940) regard aspects of his applications and affidavits as commercially sensitive. Mr Henderson seeks suppression of details which are commercially sensitive.
[150] In relation to BC 434940, Mr Henderson explained that the commercially sensitive feature of the information before the Court is the identity of the parties with whom the Body Corporate is negotiating (and thereby the subject-matter of the negotiation). He submitted that BC 434940 might be commercially disadvantaged if other commercial entities become aware of the existence of the issues and the opportunity involved.
[151] Suppression of that detail is appropriate as this judgment involves the refusal of permission. A redacted version of this judgment will issue at the same time as the full judgment.
[152] In the event the Court were later to grant any permission to Mr Henderson, an application for suppression may become more difficult to sustain. As the prohibition is a matter required to be publically notified on the Register of Companies, any permission to work in ways which would otherwise contravene the prohibition will similarly need to be recorded in the Register. A public identification of entities for which Mr Henderson may be permitted to work, and the nature of that work, will be required. Suppression of such detail will be inconsistent with the requirements of public notification. Mr Henderson and the entities for which he wishes to work will have to take that situation into account when pursuing an application for permission.
Orders
[153] I order:
(a) The permission requested by David Ian Henderson to be involved directly and/or indirectly in the management of the entities identified in Mr Henderson’s 18 applications is refused;
(b)The 18 applications are adjourned with leave to the applicant to have them brought on with one week’s notice if a suitably amended form of application and supplementary evidence is filed;
(c) There is no order as to costs and disbursements.
Associate Judge Osborne
Representation:
D I Henderson (in person)
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