Damien Grant: Statutory management flirts with mob rule

Mark Bryers, director of failed property investment company Blue Chip. Photo / Doug Sherring

It is deeply irritating to see the likes of Rod Petricevic and Mark Bryers enjoying the fruits of their questionable labour as the judicial process grinds so very slowly after them.

But there is also something reassuring about the fact that they enjoy their liberty regardless of the mood of the community.

Justice in New Zealand is handed down by judges in a reasoned and calm environment.

These ponderous judicial minds stand between the mob and those who have earned public opprobrium.

Crucially, this restraint is binding on our elected officials. The executive branch of Government cannot haul the latest victim of the public's attention off to the nearest stockade, no matter how many votes there may be in it.

We accept this trade-off. It is the rule of law that we must live with, along with the benefit that should we find ourselves on the wrong side of an angry press then we too shall enjoy the protection of a wise and elderly judge who has seen wilful mobs come and go.

It comes as a surprise, then, that there is no judicial oversight over the extraordinary powers the Crown enjoys under the sledgehammer of statutory management.

The process is fairly simple. The Securities Commission, a politically appointed but unelected body, recommends to the relevant minister that a corporation and possibly individuals associated with it be placed under the control of external management.

If the minister agrees, he makes the request to the Governor-General, who is bound by convention to accept the advice of his minister.

The threshold for the recommendation is low.

It is sufficient that the commission be satisfied a corporation is or may be acting fraudulently or recklessly and that statutory management is desirable.

Historically it has been used rarely, as there is a recognition that the regime was designed to cope with extraordinary circumstances.

Despite much clamouring there were no moves by the Securities Commission against Hanover Finance or the companies involved in the Blue Chip saga.

So it was a shock last month to see the commission take such drastic action against the South Island's richest man, Allan Hubbard, and his Aorangi Securities.

In 2005, the Law Commission looked at the regime and made a number of recommendations.

Perhaps the most important of these was that the decision to place a company and/or individuals in statutory management should rest with the court and not the Securities Commission and the executive branch of government.

Joe Public is not privy to the full facts surrounding the Aorangi and Hubbard decision, so it is impossible to know if it was the right one.

But if the commission had to convince a judge rather than a politician before calling in the statutory managers, the brouhaha surrounding the recent exercise of this power may be more muted.