FEDERAL COURT OF AUSTRALIA

SK Foods LP v SK Foods Australia Pty Limited, in the matter of SK Foods Australia (No 2) [2012] FCA 1509

THE COURT ORDERS THAT:

1.    The plaintiffs file a third amended originating process, together with a statement of claim, by 7 January 2013.

2.    The plaintiffs’ interlocutory application and the proceeding generally be stood over to 8 February 2013 for further directions.

3.    The plaintiffs have leave to join the party acting as trustee of the SSC&L 2007 Trust, as the tenth defendant to this proceeding, should the plaintiffs choose to join such party to this proceeding.

4.    The costs of today be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This proceeding was commenced by an originating process filed on 20 February 2012. There is currently before the Court a second further amended originating process filed on 20 June 2012, which states that there is dispute between the plaintiffs and various of the defendants in relation to shares in the capital of SK Foods Australia Pty Limited (SK Foods Australia) and as to the ownership of an intercompany loan owing by SK Foods Australia. The plaintiffs are SK Foods LP, a California limited partnership, and Mr Bradley Sharp, who is, in effect, a trustee in bankruptcy of SK Foods LP, having been appointed by the United States Bankruptcy Court, Eastern District of California (the United States Bankruptcy Court).

2    The matter before the Court today is an interlocutory application by the plaintiffs, seeking recognition of orders made by the United States Bankruptcy Court, under a letter of request addressed to the Court by the Honourable Robert S. Bardwil, United States Bankruptcy Court Judge. By the letter of request, Judge Bardwil requests that the Federal Court of Australia recognise the judgment of the United States Bankruptcy Court made on 29 November 2012, authorise Mr Sharp to make demand upon the liquidators of SK Foods Australia, who are the fourth defendants (the Liquidators), for the amounts distributable to the holder of the shares in that company and the intercompany loan, which, by the judgment of 29 November 2012, were decreed to be assets of the bankrupt estate of SK Foods LP. The letter of request also requests that the Court order and direct the Liquidators to recognise and observe the judgment of the United States Bankruptcy Court as determinative of Mr Sharp’s rights to the proceeds of the intercompany loan and of Mr Sharp’s rights as the legal and beneficial owner of the shares in the capital of SK Foods Australia.

3    The interlocutory application has been brought in the principal proceeding, NSD 262 of 2012, as opposed to a second proceeding, NSD 2334 of 2011, which is an appeal against rulings made by the Liquidators. By the interlocutory application, the plaintiffs seek not only orders recognising the judgment of the United States Bankruptcy Court but ancillary orders in the nature of declarations as to the ownership of the shares in SK Foods Australia and of the intercompany debt.

4    In essence, the plaintiffs seek summary judgment in respect of the substantive matters intended to be raised in the proceeding. One concern, however, is that while the question of ownership of the shares in the capital of SK Foods Australia is clearly raised by the second further amended originating process, the question of ownership of the intercompany debt, as between the plaintiffs, on the one hand, and the fifth to ninth defendants (the Salyer interests), on the other, is only raised indirectly. The relief presently sought in the proceeding relates only to the rejection by the Liquidators of a proof of debt in relation to the intercompany debt.

5    It appears that there were purportedly various transactions whereby the shares and the intercompany debt were assigned by SK Foods LP, prior to the bankruptcy, to other parties, most of whom have been joined as defendants in the proceeding and are part of the Salyer interests. One entity within the chain of title to the debt, SSC&L 2007 Trust, is not a party to the proceeding.

6    I have been assisted by detailed submissions made by the Liquidators, in the absence of the Salyer interests. The Salyer interests were notified of the hearing, but they did not appear when the matter was called. That was expected and it was because of that expectation that I directed the Liquidators to make submissions as contradictor, in effect as amicus curiae to the Court, in relation to the questions raised by the interlocutory application.

7    The interlocutory application seeks recognition, either under the general law, or under s 581 of the Corporations Act 2001 (Cth) (the Corporations Act). Section 581(2) provides that, in all external administration matters, the Court must act in aid of and be auxiliary to the courts of prescribed countries that have jurisdiction in external administration matters and may act in aid of and be auxiliary to the courts of other countries that have jurisdiction in external administration matters.

8    Section 581(3) provides that, where a letter of request from the court of a country other than Australia, requesting aid in an external administration matter, is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen in its own jurisdiction. While it is clear that the Court would recognise the appointment of Mr Sharp as trustee in bankruptcy of SK Foods LP, it is by no means clear that s 581 is apt to enable the Court to make the orders sought in the interlocutory application.

9    In the course of the hearing today the relief claimed was reformulated. I shall summarise that relief briefly. The orders proposed were:

•    that the appointment of Mr Sharp as the trustee in bankruptcy of SK Foods LP be recognised;

•    that the partial judgment of the United States Bankruptcy Court made on 29 November 2012 be recognised in so far as the orders made operate in personam;

•    a declaration that the plaintiffs are entitled to be recognised as the legal and beneficial owners of the shares in SK Foods Australia; and

•    a declaration that the plaintiffs’ entitlement to lodge a proof of debt in respect of the intercompany debt is superior to that of the Salyer interests.

The other orders were orders, in effect, directing the Liquidators to accept a proof of debt in relation to the intercompany debt and the shares.

10    Before the Court will recognise and enforce a foreign judgment in personam there are several prerequisites. The first is that the foreign court must have exercised jurisdiction over the judgment debtor that will be recognised by Australian courts. Second, the foreign judgment must be final and conclusive. Third, there must be an identity of the parties involved. The fourth is that the foreign judgment must be for a certain sum.

11    The only purpose for making the present application is to preclude matters being put in issue in this proceeding that appear to have been resolved in the proceeding in the United States Bankruptcy Court. I do not consider that, at this stage, there is utility in recognising the orders, until it is clear that the questions raised in this proceeding are the same questions as those that have been raised and disposed of in the United States proceeding. Whether or not the Court will then formally recognise the orders may not matter. The question is whether or not the defendants in this proceeding will be estopped from putting in issue the questions that have been disposed of in the United States proceeding.

12    For that reason, I consider that the appropriate course is to stand over the hearing of the application for recognition, under the letter of request received from Judge Bardwil. In the meantime, I propose to direct the plaintiffs to file a third further amended originating process seeking substantive relief as to the questions that are said to have been resolved in the United States proceeding. That should be accompanied by a statement of claim. I propose to direct that the defendants file defences to the statement of claim within a reasonably short period of time. If any defence puts in issue allegations in a way that would be inconsistent with the determination in the United States court, it would be appropriate for the plaintiffs to file a reply, in effect pleading issue estoppel or res judicata.

13    I therefore propose to fix a timetable for bringing the pleadings to an end on that basis. The matter would then be listed for hearing of any application for summary judgment that might be made on behalf of the plaintiffs or, if there is pleaded an issue estoppel or res judicata, for prior determination of the question that would be thrown up by the reply.

Associate:

Dated:    15 January 2013