Finlayson Christopher: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
Finlayson Christopher: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
[Volume:634;Page:6182] 
CHRISTOPHER FINLAYSON (National) 
: 
 As other National members have said we oppose the third readings of the legislation arising from the Insolvency Law Reform Bill because we say there are a number of flaws in it. We think there is a lot of good in it too—and I will cover some of that good material as well as the bad—but the failure to address two key issues means regrettably that we have to oppose it. 
Maryan Street in her third reading speech said that National members’ opposition to the legislation was hollow. Well it is not so. We have major concerns about voluntary administration as it is to be enacted because of the position of the Inland Revenue Department. If that member wants an example of hollowness she could have listened to the Minister Lianne Dalziel’s third reading speech. In it the Minister regurgitated the usual Labour Party tripe about economic transformation. It is one of the unfortunate aspects of this year—and I am sure Mr Chauvel will learn it if he stays in this place a while—that there is constant repetition of a Labour Party litany: economic transformation national identity and I think the third one is welfare for families. Well economic transformation will be impeded because of the flaws in this legislation. 
In my first reading speech I mentioned those who have contributed over the years to the reform of insolvency law. I mentioned the Law Commission and Justice Blanchard. I also mentioned Peter McKenzie former chair of the Securities Commission and probably New Zealand’s leading expert in this field. Now that the legislation looks as though it will come into effect I hope Mr McKenzie will find time to re-write Spratt and McKenzie’s  
Law of Insolvency 
. As a former law clerk staff solicitor and partner of Mr McKenzie I grew tired of listening to his excuse for not updating his book which was that the law was shortly to be changed. That can no longer be regarded as an excuse. It is one he ran for about 20 years. 
A close analysis of this legislation shows that the reform is not all that dramatic. For example in the Committee stage I analysed Part 3 of the original bill which comprises 10 subparts. Very few of the clauses in those 10 subparts actually introduce new provisions. Rather they re-enact the existing law and practice from the 1967 Act or adopt provisions that have their genesis in the Companies Act 1993. I must say that one reform I can live with is that the procedure for bankrupting debtors is finally to be updated. For 20 years we have been awaiting the abolition of the bankruptcy petition procedure and now it finally goes. I suppose it is better late than never. 
As I said very few points of contention in regard to this legislation exist between the National Party and other parties but they were not properly addressed by the Committee. Other than the contribution by Mr Fairbrother on the no-asset procedure no Labour MP made any contribution. It makes one wonder whether there is any point to a debate in this House. Certainly for Labour not to join issue on in this case two points of principle is very disappointing indeed. So what were the two contentious issues? As my friends on the National Party side have said there were two. The first relates to the no-asset procedure and the second to voluntary administration. 
The first the no-asset procedure is to be found in Subpart 4 of Part 5 of the original bill. Several of my colleagues at the Committee stage questioned how this procedure was consistent with notions of individual responsibility and we have heard some of those arguments again this afternoon. But I also questioned the usefulness of the procedure especially given the other procedures in Part 5. I also noted that bankruptcy is in fact a discretionary remedy and I refer members to clause 37. So in some cases the court may decline to bankrupt the debtor because it would be pointless to do so. One wonders why the debtor would bother to go through the no-asset procedure rather than simply oppose the application that he or she be made bankrupt. 
The second one which is of major importance is Part 8 of the original bill which introduces Part 15A to the Companies Act 1993. It is called the voluntary administration procedure and essentially adopts the equivalent Australian legislation but fails to deal with the critical issue of the Inland Revenue Department’s position. The Inland Revenue Department status could undermine the effectiveness of voluntary administration. Members have heard the various arguments from other speakers this afternoon and I will not repeat them. But I will say this: every submitter on this provision was very very clear that unless the Government addressed the issue of the priority status for the Inland Revenue Department the voluntary administration scheme could be compromised. 
 As Katherine Rich said National is going to pay very close attention to this particular innovation in practice to see whether some amendment will be required—and I think it will be needed sooner rather than later. I think it is a very unfortunate situation where every submitter on a bill thinks something in it should be altered the Opposition agrees and tries to engage the Government in a principled debate on the issue and not one Government member actually addresses the issue in the Committee stage. 
Hardly any mention was made in most stages of the original bill of Part 9 which concerns cross-border insolvency. It is now a separate bill. It really is one of the most interesting aspects of the legislation. The Law Commission published a report on cross-border insolvency in 1999 and I think it even went to the last National Minister of Justice of that period the Hon Tony Ryall. Obviously in an election year there was no time to act on the report but I am surprised that it has taken about 7 years for this Government to act on it. It was a good report and frankly it could have been acted upon within about 12 to 18 months. That report sets out some very useful reasons why we need the model law and why we need this kind of private international law reform. 
The report noted that there were three broad policy factors in favour of reform: the globalisation trend factor the fiscal factor and the efficiency and fairness factor. Factors that weighed against reform were the sovereignty factor and the adequacy of the existing law. Well there is no doubt that the existing law is not adequate and with globalisation and greater interaction between New Zealand companies and individuals and overseas companies and individuals there does need to be a move in this area; this is one part of the insolvency law reform package that National is happy with. 
I am also pleased and it is just a very minor point to note clause 493 of the original bill. It is a minor amendment but one that is being replicated in other legislation these days. This highly artificial distinction between Commonwealth countries and foreign countries now goes and we simply refer to the jurisdiction of the High Court to act in aid of overseas courts. It is a distinction that has been hanging around for many years and makes very little sense at all. 
So at the end of the day this reform is long overdue. It represents the fruits of the labour of the Law Commission over many years. I have mentioned the good work of many speakers. Much good is achieved in this legislation but as usual with this Government it contains mistakes in certain respects. It is very disappointing that these mistakes were pointed out by the Opposition and by many submitters but simply ignored because as usual this Government knows best. It ignored what it was advised and simply failed to debate the issue. That is the reason why National will be opposing this legislation and why we oppose the third readings.