FEDERAL COURT OF AUSTRALIA

Wild (Foreign Representative) v Coin Co International PLC (Administrators Appointed); In the Matter of Coin Co International PLC (Administrators Appointed) [2015] FCA 354

IN THE MATTER OF COIN CO INTERNATIONAL PLC (ADMINISTRATORS APPOINTED)

THE COURT ORDERS THAT:

1.    Pursuant to s 6 of the Cross-Border Insolvency Act 2008 (Cth) (CBI Act) and cl 1 of Art 17 of the Model Law which is Sch 1 to the said Act, the proceedings in the High Court of Justice of England and Wales (Chancery Division, Companies Court) No 8616 of 2014 (UK proceedings), in which the plaintiffs were appointed as joint and several administrators of the defendant on 27 November 2014, be recognised as a foreign proceeding within the meaning of Art 2(a) of the Model Law.

2.    Pursuant to s 6 of the CBI Act and cl 2(a) Art 17 of the Model Law, the UK proceedings be recognised as a foreign main proceeding for the purposes of the Model Law.

3.    Pursuant to cl 1(e) of Art 21 and cl 2 of Art 21 of the Model Law, the administration or realisation of all of the defendant’s assets located in Australia be entrusted to David Kerr and Peter Marsden (Australian representatives) in accordance with their Consent to Act as Designated Persons filed on 3 March 2015.

4.    Pursuant to s 11 of the CBI Act and cl 1(g) of Art 21 and cl 1 of Art 23 of the Model Law, subject to the provisions of the Corporations Act 2001 (Cth) (Corporations Act), all powers normally available to liquidators appointed under the Corporations Act be made available to the plaintiffs’ Australian representatives as if they had been appointed as liquidators under the Corporations Act.

5.    The plaintiffs’ costs of this Application be paid out of the proceeds of the sale of the property of the defendant located in Australia.

6.    In compliance with subparagraphs (c) and (d) of r 15A.7(1) of the Federal Court (Corporations) Rules 2000 (Cth) (rules), the plaintiffs:

(a)    Within seven (7) days of the date of the making of these orders, send a copy of the notice of the making of these orders in accordance with Form 21 in the rules to every known creditor of the defendant who dealt with the defendant in Australia; and

(b)    Within fourteen (14) days of the date of the making of these orders, publish a notice of the making of these orders in accordance with Form 21 in the rules in a daily newspaper circulating generally in Australia.

7.    The plaintiffs, the Australian representatives and each creditor or person claiming to be a creditor of the defendant have liberty to apply on three (3) days’ notice or on such shorter notice as a Judge might allow.

8.    The plaintiffs have leave to have these orders entered forthwith.

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

IN THE MATTER OF COIN CO INTERNATIONAL PLC (ADMINISTRATORS APPOINTED)

REASONS FOR JUDGMENT

1    On 27 November 2014, the High Court of Justice of England and Wales (Chancery Division, Companies Court) made an order appointing Matthew Richard Meadley Wild and John David Ariel of Baker Tilley Restructuring and Recovery LLP as joint administrators of Coin Co International PLC (the company). That appointment was made at the request of Santander UK PLC which is the holder of a debenture created on 23 March 2011 and registered on 25 March 2011 containing fixed and floating charges over the whole or substantially the whole of the company’s property and undertaking. As at 27 November 2014, each of the administrators was authorised under the provisions of Pt XIII of the Insolvency Act 1986 (UK) (UK Act) to act as an insolvency practitioner.

2    By Originating Process filed in this Court on 4 March 2015, the administrators sought orders that:

1.    The proceedings of [sic] the High Court of Justice of England and Wales (Chancery Division, Companies Court) No 8616 of 2014 relating to the first [sic] defendant (foreign proceedings) in which the plaintiffs were appointed joint and several administrator [sic] of the defendant in accordance with Schedule B1 of the Insolvency Act 1986 (UK), be recognised as foreign proceedings within the meaning of sub-paragraph (a) of Article 2 of Schedule 1 to the Cross-Border Insolvency Act 2008 (Cth) (Model Law).

2.    The foreign proceedings be recognised as foreign main proceedings in relation to the defendant within the meaning of sub-paragraph (b) of Article 2 of the Model Law.

3.    Pursuant to sub-paragraph (e) of Article 21(1) of the Model Law, the administration and realisation of all of the defendant’s assets in Australia be entrusted to David Kerr and Peter Marsden of RSM Bird Cameron Partners of Level 12, 60 Castlereagh St, Sydney NSW 2000.

4.    Pursuant to sub-paragraph (g) of Article 21 of the Model Law, the administration of the defendant’s estate in Australia be taken to have begun for the purpose of section 513C of the Corporations Act 2001 (Cth) on either:

(a)    27 November 2014, being the date on which the plaintiffs were appointed over the defendant in the United Kingdom in the foreign proceedings; or

(b)    Alternatively, on the date in which the Court makes the orders sought in paragraphs 1, 2 and 3 of this Originating Process.

5.    The plaintiffs’ costs of this application be payable out of the property of the defendant located in Australia or otherwise out of the defendant’s estate.

3    That Application was heard by me on 9 April 2015. By these Reasons for Judgment, I determine that Application.

4    Both Messrs Kerr and Marsden are official liquidators for the purposes of the Corporations Act 2001 (Cth). Both have consented to act as persons designated by the Court under Art 21(2) of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law), the English text of which is set out in Sch 1 to the Cross-Border Insolvency Act 2008 (Cth) (the CBI Act), to be entrusted with the distribution of all of the company’s assets in Australia.

5    In early March 2015, the administrators served upon each of the known Australian creditors a letter dated 5 March 2015 under cover of which was sent a notice in accordance with Form 20 in Schedule 1 to the Federal Court (Corporations) Rules 2000 (Cth) (rules) and r 15A.6 of the rules by which the creditors were notified of the fact that the Originating Process had been filed and of the fact that it was returnable before the Court on 9 April 2015.

6    Only one creditor, the Australian Committee for UNICEF Limited (UNICEF) notified the administrators of its intention to appear on 9 April 2015 as required by r 2.9 of the rules. UNICEF claims to be a creditor of the company in the amount of $174,782.86.

7    UNICEF was also the only creditor which actually appeared at the hearing before me.

8    The only matter in dispute between the administrators and UNICEF concerned prayer for relief 4(a) in the Originating Process. The administrators contend that the Court ought to make a declaration or order to the effect that the administration of the company’s estate in Australia should be taken to have commenced on 27 November 2014, which is the date of their appointment as administrators by the English High Court of Justice, whereas UNICEF argues that the Court ought not to make such a declaration or order. It contends that the Court should make clear that the administration of the company’s estate in Australia will commence on the date when the Court makes an order under the Act by which it recognises the appointment of the administrators to the company by the English High Court of Justice, and not before.

9    UNICEF accepts that the administrators are entitled to the orders claimed by them in pars 1, 2, 3, 4(b) and 5 of the Originating Process.

10    Minter Ellison lawyers, representing another creditor of the company, Jetstar Airways Pty Ltd (Jetstar), sent a letter dated 8 April 2015 to the solicitors for the administrators (Exhibit A) in which Minter Ellison set out Jetstar’s contentions that the Court does not have the power to make either of the orders claimed by the administrators in the alternative in par 4 of the Originating Process and, if the Court does have the power to make one or other of those orders, it should not do so in the present case. It was submitted on behalf of Jetstar that the Corporations Act does not empower an Australian insolvency practitioner to seek an order deeming a voluntary administration under Pt 5.3A of the Corporations Act to have commenced on a particular date for the purposes of s 513C of that Act. It was said that such an order would be unnecessary because the Corporations Act itself prescribes when a voluntary administration is deemed to commence. It was also contended that, even if the Court has power to make such an order, the Court ought not do so in the circumstances of this case, because it might unfairly prejudice the company’s Australian secured creditors vis-a-vis its foreign secured creditors.

11    Jetstar did not appear at the hearing before me. It contented itself with placing before the Court the arguments set out in Minter Ellison’s letter.

12    Although the only issue between the administrators and UNICEF is the issue described at [8] above and notwithstanding that no other creditor of the company appeared at the hearing of the administrators’ application, the Court must nonetheless be satisfied upon the basis of admissible evidence that it should make the orders sought.

The Facts

13    The company is a public limited company which was incorporated in the United Kingdom on 30 January 1995. Prior to the appointment of the administrators, the company’s registered office and principal place of business was located at 56–58 Victoria Road, Burgess Hill, West Sussex in the south of England.

14    The company was operated as a family business by the Baker family, four members of which are directors and shareholders.

15    As at the date of the appointment of the administrators, the company employed 42 employees at its head office at Burgess Hill. All of these employees have now been made redundant.

16    Before being placed under administration, the company conducted two businesses: The first was a cash services business in the United Kingdom and the second was a global currency exchange business.

17    In its UK cash services business, the company was retained by its customers to collect cash from car parks and ticketing machines operated by those customers. It was then required to transport that cash to its ultimate destination by means of secure transport. The company was paid a service fee for each collection and delivery completed. Most of the company’s cash flow was generated by its UK cash services business.

18    In its global currency exchange business, the company would purchase mixed consignments of notes and coins from customers on credit in the UK and in other countries. The company’s customers typically comprised international transport providers (airlines and train operators), postal services organisations and charities which would collect large amounts of coins or notes in multiple currencies in the ordinary course of their businesses. These customers found it convenient to retain the company to deal with these coins and notes as the customers did not have the time, expertise or contacts quickly to convert this money into funds available in their bank accounts. By way of contrast, the company had coin and note counting machines, large stocks of currency reserves in multiple denominations and access to various banks around the world in which it could bank its foreign currency stocks at competitive exchange rates.

19    As part of its global currency exchange business, the company had three overseas branch offices which were intended to act as regional hubs to service customers with operations outside the UK. These offices were located in Ireland, Canada and Australia. Coin exchange businesses were also conducted by a wholly owned subsidiary of the company in Germany and by related companies in Turkey, Morocco and Tunisia.

20    By November 2014, at the latest, the company had become insolvent. The administrators believe that the following factors caused that insolvency:

(a)    Poor accounting and internal management practices which in turn led to a failure on the part of the company accurately to record details of its creditors and the value of sales made by it in its books and records;

(b)    Termination of a number of key customer cash services contracts in the UK by reason of the company’s failure to perform those contracts appropriately;

(c)    The misappropriation and misuse of the company’s funds and other assets by some of its directors; or

(d)    A combination of two or all three of the above factors.

21    Since being appointed, the administrators have taken control and possession of the company’s assets in the UK and overseas including all of its real property, cash at bank, plant and equipment and currency stocks. They have also taken steps to realise the company’s assets and to terminate the employment of most of its employees.

22    The administrators are considering whether to apply to the English High Court of Justice for an order that the company be wound up.

23    Australia is the only country where the administrators have applied for recognition under the Model Law.

24    The administrators have taken steps to secure control of the company’s assets in Australia. Two of the six persons employed by the Australian branch have already been made redundant. It is expected that the remaining employees will be terminated in the near future.

25    At pars 38–40 of his affidavit sworn on 26 February 2015 and filed in this proceeding, Mr Wild set out his present knowledge of the company’s assets in Australia. It is not necessary to traverse that material in any detail for present purposes.

26    At pars 41–45 of his affidavit, Mr Wild also provided details of the known Australian creditors. In addition, two of those creditors, UNICEF and Jetstar, have asserted trust claims over coin stocks currently held by the company in Australia. Jetstar claims to be acting in association with World Vision Australia which is the company’s largest creditor in Australia.

27    The administrators have now decided to wind up the company’s operations in Australia. They have been advised that it is in the best interests of the company’s creditors and more cost effective for the company’s assets in Australia to be sold in Australia rather than being shipped back to the UK.

28    At par 54 of his affidavit, Mr Wild said:

In these circumstances, I expect the following steps will need to be taken to wind up the Company’s operations in Australia:

(a)    the Company’s office at Loganholme in Queensland will need to be vacated and all of the Company’s stock and plant and equipment moved into secure storage pending sale;

(b)    the employment of the Company’s remaining employees in Australia will need to be terminated;

(c)    all of the Company’s records in Australia will need to be reviewed and investigated to determine whether there are any other assets in Australia (e.g voidable transaction) [sic] which may augment the insolvent estate;

(d)    all of the Company’s currency stock and plant and equipment will need to be sold or otherwise dealt with;

(e)    any outstanding disputes between the Company and its two largest creditors in Australia, being UNICEF and Jetstar/World Vision regarding any trust claims they have against the Company’s assets in Australia will need to be resolved or litigated (if necessary);

(f)    proofs of debt will need to be called for in Australia and adjudicated upon including any priority claims which the Company’s employees in Australia may have against the insolvent estate pursuant to Part 5.6 of the Corporations Act 2001 (Cth); and

(g)    the proceeds of the sale of the Company’s assets in Australia will need to be repatriated to the UK administration to be dealt with as part of the insolvent estate.

29    Mr Wild also testified that, in the opinion of the administrators, it will be more cost effective and efficient for the steps which he has outlined at par 54 of his affidavit to be put into effect by insolvency practitioners based in Australia.

30    At par 59 of his affidavit, Mr Wild said:

I anticipate that the appointment of Mr Kerr and Mr Marsden as my representatives in Australia will create efficiencies and be in the best interest of creditors as whole as:

(a)    it will give Mr Ariel and I a presence on the ground in Australia rather than us having to act via agents with minimal supervision;

(b)    it will make it easier for decisions to be made quickly in Australia and for documents to be executed on behalf of the Company in Australia by Mr Kerr or Mr Marsden;

(c)    Mr Kerr and Mr Marsden has [sic] extensive contacts in Australia and will know better than Baker Tilly who are the best consultants to retain to deal with the Company’s assets in Australia and at what price. This will be particularly relevant in conducting a sale campaign to sell the Company’s assets in Australia; and

(d)    Mr Kerr and Mr Marsden are far more familiar with the relevant insolvency procedures in Australia than I am and are therefore better placed to seek advice and consider what impact applicable provisions of the Corporations Act, Personal Property Securities Act 2009 and the Cross-Border Insolvency Act 2008 will have on the Company’s assets and creditors in Australia.

31    Messrs Kerr and Marsden are very experienced local insolvency practitioners. They have already assumed practical control over all of the assets and affairs of the company in Australia.

The Cross-Border Insolvency Act

32    Section 6 of the CBI Act provides that, subject to that Act and with the modifications set out in Pt 2 of that Act, the Model Law has the force of law in Australia.

33    In the Model Law, as it has the force of law in Australia, a reference to “this State” is a reference to Australia (see s 7(1)).

34    At various places in the Model Law, provision is made for the identification of the laws of the enacting State relating to insolvency. Under and for the purposes of the Model Law as it operates in Australia, the statutes relating to insolvency are identified as the Bankruptcy Act 1966 (Cth) and Chapter 5 (other than Pts 5.2 and 5.4A) and s 601CL of the Corporations Act (see s 8). Chapter 5 deals with the external administration of corporations. Part 5.2 (s 416–s 434G) deals with receivers and other controllers of property of corporations. Part 5.4A (s 461–s 464) deals with winding up corporations on grounds other than insolvency. Section 601CL regulates the cessation of business in Australia by a registered foreign company.

35    The Federal Court of Australia is designated under s 10 of the CBI Act as a court competent to perform the functions referred to in the Model Law relating to the recognition of foreign proceedings and cooperation with foreign courts.

36    Section 11 of the CBI Act provides:

11    Functions of the trustee (in bankruptcy proceedings) and the registered liquidator (in corporate insolvencies)

The Model Law has the force of law in Australia as if the Model Law referred to whichever of the following is appropriate:

(a)    the trustee (within the meaning of subsection 5(1) of the Bankruptcy Act 1966);

(b)    a registered liquidator (within the meaning of section 9 of the Corporations Act 2001);

wherever the Model Law indicates that the title of the person or body administering a reorganization or liquidation under the law of the enacting State is to be inserted.

37    In s 9 (Dictionary) of the Corporations Act, “registered liquidator” is defined as “… a person registered as a liquidator under subsection 1282(2)”. Section 1282(2) contains requirements that must be satisfied before a person can be registered as a liquidator.

38    Section 16 of the CBI Act provides:

16    Effects of recognition of a foreign main proceeding

For the purposes of paragraph 2 of Article 20 of the Model Law (as it has the force of law in Australia), the scope and the modification or termination of the stay or suspension referred to in paragraph 1 of that Article, are the same as would apply if the stay or suspension arose under:

(a)    the Bankruptcy Act 1966; or

(b)    Chapter 5 (other than Parts 5.2 and 5.4A) of the Corporations Act 2001;

as the case requires.

39    Section 17 of the CBI Act is in the following terms:

17    Actions to avoid acts detrimental to creditors

(1)    The actions referred to for the purposes of paragraph 1 of Article 23 of the Model Law (as it has the force of law in Australia) are actions arising under or because of:

(a)    section 120, 121, 121A, 122, 128B or 128C or Division 4A of Part VI of the Bankruptcy Act 1966; or

(b)    Division 2 of Part 5.7B of the Corporations Act 2001.

(2)    A provision referred to in paragraph (1)(a) or (b) applies, with appropriate changes, in relation to an action for the purposes of a foreign proceeding in the same way it would apply if the action were for the purposes of a proceeding in relation to:

(a)    a bankrupt (within the meaning of subsection 5(1) of the Bankruptcy Act 1966); or

(b)    a company (within the meaning of section 9 of the Corporations Act 2001);

as the case requires.

40    Section 22 of the CBI Act provides:

22     Interaction with the Corporations Act 2001

(1)    If the Model Law (as it has the force of law in Australia) or a provision of this Act is inconsistent with a provision of:

(a)    Division 9 of Part 5.6 of the Corporations Act 2001; or

(b)    Part 5.7 of the Corporations Act 2001;

the Model Law or the provision of this Act prevails, and the provision of the Corporations Act 2001 has no effect to the extent of the inconsistency.

(2)    The Model Law (as it has the force of law in Australia) and this Act, are in addition to, and not in derogation of, section 601CL of the Corporations Act 2001.

41    Section 23 authorises the Governor-General to make regulations under the CBI Act. Regulations were made on 19 June 2008. Nothing in those regulations is of present relevance.

The Model Law

42    The preamble to the Model Law, as in force in Australia through the operation of the CBI Act, is in the following terms:

PREAMBLE

The purpose of the present Law is to provide effective mechanisms for dealing with cases of cross border insolvency so as to promote the objectives of:

(a)    Cooperation between the courts and other competent authorities of this State and foreign States involved in cases of cross border insolvency;

(b)    Greater legal certainty for trade and investment;

(c)    Fair and efficient administration of cross border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;

(d)    Protection and maximization of the value of the debtor’s assets;

(e)    Facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

43    The Model Law applies where assistance is sought in Australia by a foreign court or a foreign representative in connection with a foreign proceeding (see Art 1(a)).

44    Article 2 contains the following definitions for the purposes of the Model Law, namely:

(a)    “Foreign proceeding” means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation;

(b)    “Foreign main proceeding” means a foreign proceeding taking place in the State where the debtor has the centre of its main interests;

(c)    “Foreign non main proceeding” means a foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor has an establishment within the meaning of subparagraph (f) of the present article;

(d)    “Foreign representative” means a person or body, including one appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceeding;

(e)    “Foreign court” means a judicial or other authority competent to control or supervise a foreign proceeding;

(f)    “Establishment” means any place of operations where the debtor carries out a non-transitory economic activity with human means and goods or services.

45    Article 8 provides:

Interpretation

In the interpretation of the present Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith.

46    Article 9 of the Model Law provides that a foreign representative is entitled to apply directly to this Court.

47    Article 11 of the Model Law relevantly provides that a foreign representative is entitled to apply to commence a proceeding under Ch 5 (other than Pt 5.2 and Pt 5.4A) of the Corporations Act and s 601CL of the Corporations Act if the conditions for commencing such a proceeding are otherwise met.

48    Under Art 13(1) of the Model Law and subject to Art 13(2) (as modified by s 12 of the CBI Act), foreign creditors have the same rights regarding the commencement of, and participation in, a proceeding under the provisions of the Corporations Act specified in s 8(b) of the CBI Act as creditors in Australia.

49    Article 14 of the Model Law requires that, whenever notification is to be given to creditors in Australia, such notification shall also be given to known creditors that do not have addresses in Australia.

50    Chapter III of the Model Law is entitled: “Recognition of a Foreign Proceeding and Relief”. Chapter III comprises Art 15–Art 24 of the Model Law.

51    Articles 15, 16 and 17 of the Model Law provide:

Article 15

Application for recognition of a foreign proceeding

1.    A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed.

2.    An application for recognition shall be accompanied by:

(a)    A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or

(b)    A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or

(c)    In the absence of evidence referred to in subparagraphs (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative.

3.    An application for recognition shall also be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative.

4.    The court may require a translation of documents supplied in support of the application for recognition into an official language of this State.

Article 16

Presumptions concerning recognition

1.    If the decision or certificate referred to in paragraph 2 of article 15 indicates that the foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2 and that the foreign representative is a person or body within the meaning of subparagraph (d) of article 2, the court is entitled to so presume.

2.    The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalized.

3.    In the absence of proof to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor’s main interests.

Article 17

Decision to recognize a foreign proceeding

1.    Subject to article 6, a foreign proceeding shall be recognized if:

(a)    The foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2;

(b)    The foreign representative applying for recognition is a person or body within the meaning of subparagraph (d) of article 2;

(c)    The application meets the requirements of paragraph 2 of article 15;

(d)    The application has been submitted to the court referred to in article 4.

2.    The foreign proceeding shall be recognized:

(a)    As a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or

(b)    As a foreign non main proceeding if the debtor has an establishment within the meaning of subparagraph (f) of article 2 in the foreign State.

3.    An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time.

4.    The provisions of articles 15, 16, 17 and 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have ceased to exist.

52    Article 18 requires the foreign representative to keep the court abreast of substantial changes in the information furnished to it.

53    Article 19 addresses interim measures.

54    Articles 20, 21 and 23 of the Model Law are in the following terms:

Article 20

Effects of recognition of a foreign main proceeding

1.    Upon recognition of a foreign proceeding that is a foreign main proceeding:

(a)    Commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed;

(b)    Execution against the debtor’s assets is stayed;

(c)    The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.

2.    The scope, and the modification or termination, of the stay and suspension referred to in paragraph 1 of the present article are subject to [refer to any provisions of law of the enacting State relating to insolvency that apply to exceptions, limitations, modifications or termination in respect of the stay and suspension referred to in paragraph 1 of the present article].

3.    Paragraph 1 (a) of the present article does not affect the right to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor.

4.    Paragraph 1 of the present article does not affect the right to request the commencement of a proceeding under [identify laws of the enacting State relating to insolvency] or the right to file claims in such a proceeding.

Article 21

Relief that may be granted upon recognition of a foreign proceeding

1.    Upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including:

(a)    Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1 (a) of article 20;

(b)    Staying execution against the debtor’s assets to the extent it has not been stayed under paragraph 1 (b) of article 20;

(c)    Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1 (c) of article 20;

(d)    Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities;

(e)    Entrusting the administration or realization of all or part of the debtor’s assets located in this State to the foreign representative or another person designated by the court;

(f)    Extending relief granted under paragraph 1 of article 19;

(g)    Granting any additional relief that may be available to [insert the title of a person or body administering a reorganization or liquidation under the law of the enacting State] under the laws of this State.

2.    Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in this State to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in this State are adequately protected.

3.    In granting relief under the present article to a representative of a foreign non-main proceeding, the court must be satisfied that the relief relates to assets that, under the law of this State, should be administered in the foreign non-main proceeding or concerns information required in that proceeding.

…

Article 23

Actions to avoid acts detrimental to creditors

1.    Upon recognition of a foreign proceeding, the foreign representative has standing to initiate [refer to the types of actions to avoid or otherwise render ineffective acts detrimental to creditors that are available in this State to a person or body administering a reorganization or liquidation].

2.    When the foreign proceeding is a foreign non-main proceeding, the court must be satisfied that the action relates to assets that, under the law of this State, should be administered in the foreign non main proceeding.

55    I note that the actions referred to in Art 23 are those identified in s 17(1) of the CBI Act.

56    Relevantly, for present purposes, the actions referred to in Art 23(1) of the Model Law are the actions contemplated by Div 2 of Pt 5.7B of the Corporations Act which are generally concerned with the recovery of property or compensation for the benefit of creditors of an insolvent company. The relevant sections are s 588FA–s 588FJ. Under the Corporations Act, such actions must be brought by the company’s liquidator.

57    In Yu v STX Pan Ocean Co Ltd (2013) 223 FCR 189 at 195 [11]–[12], Buchanan J said:

11.    Under these provisions, a foreign representative may apply to the Court for recognition of a foreign proceeding (Article 15(1)). Subject to Article 6 (the public policy exception), a foreign proceeding shall be recognised if the conditions in Article 17 are met. In particular, the foreign proceeding will be recognised as a “foreign main proceeding” if it is taking place in the State where the debtor has the centre of its main interests (Article 17(2)(a)). If a proceeding is recognised as a foreign main proceeding (as it must be under Article 17 if the stated conditions are met), then Article 20 has the prima facie effect of staying or suspending actions, proceedings, execution and disposition against, or of, assets of a debtor.

12    Upon recognition of a foreign proceeding, a court may, under Article 21, grant relief which is additional to the operation of Article 20. Article 22 directs courts that, in granting relief under Articles 19 or 21 (i.e. provisional relief or relief additional to the operation of Article 20), a court must be satisfied that the interests of creditors and other interested persons are adequately protected. To that end, Article 22 provides that a court may grant relief under Articles 19 and 21 (i.e. provisional or additional relief) subject to conditions and modify or terminate such relief.

58    I agree with his Honour’s brief description of the way in which the Model Law regulates the recognition of a foreign proceeding by this Court and the consequences of such recognition.

59    A comprehensive explanation of the CBI Act and the Model Law was given by Allsop CJ in Akers v Deputy Commissioner of Taxation (2014) 223 FCR 8 at 16–24 [27]–[69]. In particular, at 24 [68], the Chief Justice said:

From the above brief introduction, one can discern the four key elements of the Model Law: (a) access to local courts for foreign representatives; (b) recognition of certain orders of foreign courts; (c) relief to assist foreign proceedings; and (d) co-operation amongst courts of the states where assets are held and co-ordination of concurrent proceedings: see the Guide to Enactment at [24] and the Judicial Perspective at [13]. See also the Preamble to the Model Law.

Consideration

Recognition

60    Under Art 17 of the Model Law, a foreign insolvency is to be recognised as a “foreign proceeding” under the Model Law if:

(a)    The foreign insolvency is a “foreign proceeding” within the meaning of subpar (a) of Art 2;

(b)    The foreign representative applying for recognition is a person who falls within the definition of “foreign representative” in subpar (d) of Art 2;

(c)    The application meets the requirements of pars 2 and 3 of Art 15; and

(d)    The application has been submitted to a court of competent jurisdiction.

61    I am satisfied that the present application meets all of these requirements.

62    First, the UK administration is a “foreign proceeding” as defined in subpar (a) of Art 2 of the Model Law. It is a judicial or administrative proceeding conducted in the UK pursuant to Sch B1 to the UK Act. The UK administration relates to the insolvency of the company in which the company’s assets and affairs are subject to the control of licensed insolvency practitioners who are ultimately supervised by the Chancery Division of the English High Court of Justice. The UK administration is in the nature of a reorganisation of an insolvent company. A detailed analysis of Sch B1 to the UK Act was undertaken by Lindgren J in Tucker v Aero Inventory (UK) Ltd (No 2) (2009) 181 FCR 374 at 376–378 [12]–[24]. Further, Emmett J accepted this exposition in Pink v MF Global UK Ltd [2012] FCA 260 at [14].

63    Second, the administrators are “foreign representatives” as defined in subpar (d) of Art 2 of the Model Law. Under Sch B1 to the UK Act, the administrators are authorised and given broad powers to administer and arrange for the reorganisation or liquidation of the company’s assets and affairs (see, in particular, pars 3, 43, 49, 59, 65 and 69–72 of Sch B1 to the UK Act).

64    Third, the administrators have satisfied Art 15 in the present case. A copy of the order appointing the administrators bearing the seal of the English High Court of Justice has been tendered in evidence. Mr Wild has testified that the administrators have not applied for foreign recognition of the UK administration in any other jurisdictions. The administrators also established that the company is not subject to external administration of any kind in Australia.

65    Fourth, this Court is a court which has jurisdiction to afford recognition to the UK administration (see s 10(b)(i) of the CBI Act).

66    I am also satisfied that the UK is the company’s Centre of Main Interests (COMI). The company’s registered office was located in the UK prior to the appointment of the administrators. The administrators therefore have the benefit of the presumption set out in Art 16(3) of the Model Law. In addition, as submitted on behalf of the administrators, the evidence clearly establishes that the COMI of the company was in the UK. The particular matters supporting that conclusion are:

(a)    All of the company’s directors resided in England;

(b)    The company was incorporated in the UK and all executive decisions as to employee remuneration, business strategy and what to do with any cash generated through the company’s business in Australia were made in the UK;

(c)    The vast majority of the company’s employees were employed to work in the company’s head office at Burgess Hill;

(d)    Most of the company’s creditors are located in the UK, including its largest secured creditor, Santander UK PLC;

(e)    The company has always paid tax in the UK and was not registered for GST in Australia; and

(f)    Most of the assets of the company, including its most significant real property holdings, are located in England and are in the possession and control of the administrators.

67    The administrators have also complied with the notice provisions of r 15A.6 of the rules.

68    Accordingly, for all of the above reasons, I am satisfied that the Court should recognise the UK administration as a foreign proceeding for the purposes of the Model Law.

69    Section 16 of the CBI Act and Art 20 of the Model Law provide that recognition of the UK administration as a foreign main proceeding will have the following effects on the company in Australia:

(a)    The commencement or continuation of individual actions or individual proceedings concerning the company’s assets, rights, obligations or liabilities in Australia will be stayed;

(b)    Execution against the company’s assets in Australia will be stayed; and

(c)    The right to transfer, encumber or otherwise dispose of any assets of the company in Australia will be suspended.

70    Article 21 gives to the Court power to grant additional relief after it recognises a foreign proceeding. In particular, Art 21(1)(e) and Art 21(2) authorise the Court to appoint “another person designated by the Court” as the person to whom the administration or realisation of all or part of the company’s assets located in Australia should be entrusted.

71    In the present case, the administrators seek an order pursuant to those subparagraphs of Art 21 authorising Messrs Kerr and Marsden to be designated by the Court as such persons. This application is amply supported by the evidence. I am satisfied that I should accede to that application.

72    I am also satisfied that I should make an order specifying that Messrs Kerr and Marsden will have the same powers as if they had been appointed as liquidators of the company under the Corporations Act. In other words, in my judgment, the consequence of the combined operation of s 11 of the CBI Act and Art 23 of the Model Law is that the administrators or their Australian representatives (in this case, Messrs Kerr and Marsden) have standing to initiate actions to avoid or otherwise render ineffective acts detrimental to creditors of the company that would be available in Australia to a person appointed as liquidator to the company under Australian law.

73    While, strictly speaking, it may not be necessary for the Court to make orders spelling out the powers to be accorded to Messrs Kerr and Marsden in the present case, it has generally been the practice of the Court to do so (see, in particular, Crumpler v Global Tradewaves (In Liq) [2013] FCA 1127; Raithatha (Liquidator) v Ariel Industries PLC (In Liq) (2012) 212 FCR 139; Lawrence v Northern Crest Investments Ltd (In Liq) [2011] FCA 925; Akers v Saad Investments Company Ltd (In Liq) (2010) 190 FCR 285; and Pink v MF Global UK Ltd [2012] FCA 260).

Additional Relief Specifying the Commencement Date of the Australian Administration

74    As I have noted at [8] and [9] above, the administrators seek an order from the Court the effect of which would be to deem that the administration of the company’s estate in Australia began, for all relevant purposes, on 27 November 2014, being the date of the commencement of the UK administration, or, alternatively, on the date when the Court makes orders recognising the foreign proceeding.

75    In their Originating Process, the administrators confined the purpose for which such an order specifying the commencement date of the administration in Australia was being sought to s 513C of the Corporations Act. In argument before me at the hearing, the administrators did not confine themselves to that section or that purpose but rather sought the commencement date order “… for the purpose of any actions which [Messrs Kerr and Marsden] may wish to initiate or otherwise take advantage of under Article 23 of the Model Law”.

76    The administrators relied upon Art 21(1)(g) of the Model Law and Art 23 of the Model Law as the source of the Court’s power to make the order which they seek.

77    When s 17(1)(b) of the CBI Act is applied to the circumstances of the present case, Art 23 should be taken as providing that, upon recognition of the UK administration, the administrators’ Australian agents have standing to initiate actions arising under or because of Div 2 of Pt 5.7B of the Corporations Act. In a corporate insolvency, the provisions so identified are the voidable transaction provisions in the Corporations Act. Those provisions allow for the reversal or avoidance of transactions that an insolvent corporation has entered into which prejudice the interests of creditors. Article 23 of the Model Law provides that the foreign representative is not precluded from commencing such actions solely for the reason that that representative is not the insolvency representative approved in Australia. Article 23 also leads to the conclusion that the foreign representative will have the same standing to bring actions under Div 2 of Pt 5.7B of the Corporations Act as if that representative were a liquidator with power to act under that division.

78    At the present time, neither the administrators nor their Australian representatives have instituted any proceedings of the type authorised by Art 23 of the Model Law and Div 2 of Pt 5.7B of the Corporations Act.

79    If the administrators or their Australian representatives bring an action of the type authorised by Art 23 of the Model Law and Div 2 of Pt 5.7B of the Corporations Act, it will be necessary for the Court to make a finding as to the date of the relation back day within the meaning of one of s 588FE(2)(b)(i), s 588FE(3)(b), s 588FE(4)(c), s 588FE(5)(c) or s 588FE(6A)(b)(i), as the case may be, or to make a finding as to the date when the insolvent administration began within the meaning of s 588FE(2)(b)(ii), s 588FE(6) or s 588FE(6A)(b)(ii), depending upon which cause of action is relied upon. When such an action is brought by the administrators or their Australian representatives, the party or parties against whom the action is brought will have an interest in the determination of the date of the relation back day or the date when the administration began (as the case may be) and will be entitled to address that question or those questions by tendering evidence and making submissions.

80    The specification of the relevant date for the purposes of the various potential causes of action described in Div 2 of Pt 5.7B of the Corporations Act is a matter which should not be determined in a vacuum in circumstances where no such actions have been brought. I am of the view that neither cl 1(g) in Art 21 nor Art 23 authorise such a determination at this stage. The making of such an order is not relief of the kind contemplated by either of those provisions. To make the order sought would be to pre-empt the proper consideration of the relevant question for the purposes of such actions. It would constitute a determination which affects the rights of parties who have not had any opportunity to be heard.

81    I am not prepared to make either of the orders sought by the administrators in par 4 of their Originating Process.

82    It may well be that, after due consideration is given to the question in relation to a specific action instituted by the administrators or their Australian representatives, the Court comes to the view that the relation back day or indeed the date when the administration began in Australia should be held to be the date when the administration began in the UK viz 27 November 2014. The mere fact that I have declined to make an order to that effect for all purposes at the present time does not in any way preclude the administrators and their Australian representatives from contending that that is the correct date in respect of any particular action that may ultimately be brought.

Conclusions

83    For all of the above reasons, I decline to make any order specifying the commencement date of the administration in Australia as sought by the administrators.

84    As I have already indicated, I will make appropriate orders recognising the foreign insolvency.

Associate:

Dated:    16 April 2015