FEDERAL COURT OF AUSTRALIA

Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Limited (No 2) [2015] FCA 809

THE COURT ORDERS THAT:

1.    The proceeds of the sale of certain shares sold by Andrew Cummins and Antony Resnick (the receivers) which have been paid into Court in this proceeding (NSD 437 of 2013) or in proceeding NSD 644 of 2012 (the proceeds) be distributed as follows:

(a)    First, by paying $221,233.21 to the receivers in respect of the receivers’ interim remuneration and expenses for the period from 6 September 2013 to 7 July 2015;

(b)    Then, by paying the balance of the proceeds as follows:

(i)    64.78% of that balance to the applicant in proceeding NSD 644 of 2012 (Armada (Singapore) Pte Limited (Under Judicial Management)) by payment to the following account:

Name: Breene and Breene Solicitors Law Practice Trust Account

BSB: 082-080

Account No: 59-974-1496; and

(ii)    35.22% of that balance to the applicant in this proceeding (NSD 437 of 2013) (Coeclerici Asia (Pte) Ltd), or as directed by that applicant.

(c)    The amounts distributed in accordance with Order 1(b) above are to be applied to reduce the balance of the US Dollar components of the judgments in favour of the applicant in proceeding NSD 644 of 2012 and in favour of the applicant in this proceeding (NSD 437 of 2013).

2.    The applicant’s costs of and incidental to its application for an order for payment be costs in the proceeding and be recoverable when taxed out of any future proceeds of the sale of shares by the receivers.

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

THE COURT ORDERS THAT:

1.    The proceeds of the sale of certain shares sold by Andrew Cummins and Antony Resnick (the receivers) which have been paid into Court in proceeding NSD 437 of 2013 or in this proceeding (NSD 644 of 2012) (the proceeds) be distributed as follows:

(a)    First, by paying $221,233.21 to the receivers in respect of the receivers’ interim remuneration and expenses for the period from 6 September 2013 to 7 July 2015;

(b)    Then, by paying the balance of the proceeds as follows:

(i)    64.78% of that balance to the applicant in this proceeding (NSD 644 of 2012) (Armada (Singapore) Pte Limited (Under Judicial Management)) by payment to the following account:

Name: Breene and Breene Solicitors Law Practice Trust Account

BSB: 082-080

Account No: 59-974-1496; and

(ii)    35.22% of that balance to the applicant in proceeding NSD 437 of 2013 (Coeclerici Asia (Pte) Ltd), or as directed by that applicant.

(c)    The amounts distributed in accordance with Order 1(b) above are to be applied to reduce the balance of the US Dollar components of the judgments in favour of the applicant in this proceeding (NSD 644 of 2012) and in favour of the applicant in proceeding NSD 437 of 2013.

2.    The applicant’s costs of and incidental to its application for an order for payment be costs in the proceeding and be recoverable when taxed out of any future proceeds of the sale of shares by the receivers.

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

REASONS FOR JUDGMENT

1    In 2012, Armada (Singapore) Pte Ltd (Under Judicial Management) (Armada) commenced a proceeding in this Court against Gujarat NRE Coke Limited (Gujarat) (NSD 644 of 2012) in which Armada sought the recognition and enforcement of several foreign arbitral awards made in its favour against Gujarat. Subsequently, in 2013, Coeclerici Asia (Pte) Ltd (Coeclerici) commenced proceeding NSD 437 of 2013 in this Court against Gujarat and against one of its directors, Arun Kumar Jagatramka, in which Coeclerici claimed the recognition and enforcement of a separate foreign arbitral award made in its favour against both Gujarat and Mr Jagatramka.

2    In both sets of proceedings, the Court enforced the foreign arbitral awards in question.

3    On 7 August 2013, the Court declared that Coeclerici was entitled to enforce the foreign arbitral award which had been made in its favour and ordered monetary judgments against Gujarat and Mr Jagatramka in the amounts of:

(a)    USD8,804,336.42 (comprising USD8,500,000 Award principal and USD304,336.42 pre-judgment interest); and

(b)    GBP12,232.85 (comprising GBP11,810 Award amount in respect of arbitration costs awarded and GBP422.85 pre-judgment interest on that amount).

4    The Court also ordered that Gujarat and Mr Jagatramka pay to Coeclerici post-judgment interest on those sums at the rate of 7% per annum, compounded quarterly until payment in full.

5    At the same time as it made the declaration and orders to which I have referred at [2]–[4] above, the Court also appointed Andrew Cummins and Antony Resnick (the receivers) as receivers of Gujarat’s fully paid ordinary shares in Gujarat NRE Coking Coal Ltd, Mr Jagatramka’s fully paid ordinary shares in Gujarat NRE Coking Coal Ltd and Gujarat’s fully paid ordinary shares in Gujarat NRE Limited with wide powers of sale in respect of those shares.

6    The Court ordered that the receivers post appropriate security. This was done, as ordered. The Court also made the following order (Order 6):

6.    The reasonable costs and disbursements of the Receivers be borne:

(a)    First, from the proceeds of the sale of the shares and/or the dividends referred to in par 4 above;

(b)    Second, by the first respondent; and

(c)    Third, by the second respondent,

and be paid only after the Court has approved the amount thereof and ordered the payment thereof out of the amounts paid into Court pursuant to Order 4(iv) above or by the first respondent and/or the second respondent as the case may be.

7    I made the above orders immediately after the hearing had concluded on 7 August 2013, and published Reasons for Judgment in support of those Orders on 30 August 2013 (Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882). At [105]–[112] of those Reasons, I addressed the question of whether the Court should appoint receivers as claimed by Coeclerici. At those paragraphs, I said:

105    The only contentious aspect of the relief sought concerned the application by Coeclerici that I should appoint receivers to take control of and sell the relevant shares.

106    There is no doubt, I think, that the Court has power to appoint a receiver in aid of enforcement (as to which see University of Western Australia v Gray (No 6) [2006] FCA 1825 per French J (as his Honour then was)) including in aid of enforcement of a foreign award (see Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) (2012) 201 FCR 535 at 553 [77]).

107    Senior Counsel appearing for Gujarat Coke and Mr Jagatramka mounted a spirited argument that because the enforcement processes available to litigants in this Court must follow those of the Supreme Court of the State where the litigation is taking place, I should follow the jurisprudence of the Supreme Court of New South Wales in relation to the principles upon which receivers might be appointed in aid of enforcing a judgment. Senior Counsel did not take issue with the proposition that I had power to appoint receivers (as to which, see s 57 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act)) but did submit that the present case was not within those categories of cases where it was appropriate to do so. Senior Counsel relied upon [28-090]–[28-125] of Equity Doctrines and Remedies (4th edn, Butterworths LexisNexis, 2002) by Meagher, Heydon and Leeming and the cases referred to therein in support of the proposition that the Court should not appoint a receiver in aid of the enforcement of a judgment unless it can be shown that all available legal remedies have been tried and failed or the pursuit of such remedies would be futile.

108    I do not think that the true principle is so rigid. It seems to me that the Court may appoint receivers in aid of enforcement of a judgment at law if it can be shown that other methods of execution would be inadequate or extremely inconvenient. The guiding principle should be: What is just and convenient in all the circumstances of the case? This was the language of s 67 of the Supreme Court Act 1970 (NSW) and is the language of s 57(1) of the Federal Court Act.

109    In the present case, the enforcement alternatives available to the Court seemed to be to make a charging order or to appoint receivers. A charging order would require further steps under the supervision of the Court if the relevant shares are to be sold in order to satisfy the judgment which I ordered on 7 August 2013. The appointment of receivers, on the other hand, is a convenient (and probably the most convenient) way of expeditiously effecting the sale of the relevant shares in aid of the judgment. In the end, it is likely to be less costly than proceeding down the charging order path.

110    In DM and DB Wiskich Pty Ltd v Joseph Saadi (Supreme Court of New South Wales, 16 February 1996, unreported), Bryson J held that, although from time to time equitable remedies were given to enable judgments at law to be enforced in circumstances where the remedies available under the Common Law were inadequate, the deployment of such remedies was not confined to or conditional upon establishing that the legal remedies were inadequate. From time to time, those remedies were used in cases where no attempt had been made to engage legal enforcement remedies. In DM and DB Wiskich Pty Ltd v Joseph Saadi, Bryson J considered all of the relevant circumstances in order to determine whether the appointment of a receiver was just and convenient within the meaning of that expression in s 67 of the Supreme Court Act 1970 (NSW).

111    I took the view that that is the test which should be adopted in the present case. After all, the present case is really one where Gujarat Coke and Mr Jagatramka are not only to be subjected to enforcement of the Award but have been found by the English High Court of Justice to have no defence of any substance to the claims of Coeclerici. I do not think that this Court should take an unduly technical view of the principles which might govern the appointment of a receiver in aid of enforcement of a judgment in a case such as the present.

112    On 7 August 2013, I granted a stay of the receivership orders (and only those orders) which I made on that day. I granted that stay in order to afford to Gujarat Coke and Mr Jagatramka an opportunity to pay the Award debt. It had been suggested to me from the Bar table that Gujarat Coke was in the throes of procuring substantial refinancing and that some of the refinancing funds could be used to pay out Coeclerici. I did not grant the stay in order to protect the position of Gujarat Coke and Mr Jagatramka while they considered their rights of appeal. In particular, I would not want it thought that I granted the stay with a view to having the enforcement of the judgment which I directed be entered stayed while Gujarat Coke and Mr Jagatramka pursued their appeal rights. Had I been asked to grant a stay on that basis, I would have refused to do so. I would have refused to do so because I consider the case for resisting enforcement of the Award propounded before me by Gujarat Coke and Mr Jagatramka as utterly unmeritorious.

8    None of the orders which I made were disturbed on appeal (as to which see Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd (2013) 304 ALR 468). In addition, the Full Court approved the reasoning which led to the appointment of the receivers.

9    On 3 October 2014, I made a declaration in proceeding NSD 644 of 2012 recognising and enforcing six foreign arbitral awards in favour of Armada against Gujarat. I also entered judgment in favour of Armada against Gujarat in the following amounts:

(a)    GBP1,412,972.65; and

(b)    USD16,196,739.57.

10    Those amounts included some components for pre-judgment interest.

11    In both cases, I ordered the respondent parties (Gujarat in the case of proceeding NSD 644 of 2012 and both Gujarat and Mr Jagatramka in proceeding NSD 437 of 2013) to pay the applicants’ costs.

12    When I delivered judgment in proceeding NSD 644 of 2012, I made orders to the effect that the receivership which I had created by the orders which I had made on 7 August 2013 in proceeding NSD 437 of 2013 was also to service the judgment which I had entered in favour of Armada in proceeding NSD 644 of 2012.

13    The receivers have diligently set about selling the shares over which they were appointed receivers but have found the sale process slow going and difficult. For this reason, I have on a number of occasions extended the term of the receivership in the expectation that, by doing so, a larger fund would be eventually created against which both award creditors (Armada and Coeclerici) could claim. As matters presently stand, the receivers have realised approximately $876,000 from the sale of shares under their control (the fund). Those moneys have been paid into Court as required by the orders made on 7 August 2013. The receivers have informed the Court that they are of the opinion that there is still utility in the receivership continuing. I accept this opinion. For that reason, I recently extended the term of the receivership yet again. The latest extension of the term of the receivership expires on 22 December 2015.

14    There are three applications presently before the Court.

15    The first of these is a claim by the receivers to be remunerated in the amount of $221,233.21 comprising fees payable to the receivers of $153,578.50 and expenses of $72,654.71. The receivers’ claim for fees and disbursements is supported by two affidavits sworn by Andrew John Cummins who is one of the receivers. Those affidavits were sworn on 23 July 2015 and 5 August 2015 respectively. In those affidavits, Mr Cummins describes in detail the work done by the receivers and the charges made for that work.

16    Coeclerici did not oppose the receivers’ claim for remuneration and expenses. Armada initially queried the amount claimed for expenses but did not question the amount claimed for remuneration. On 30 July 2015, I required the receivers to supplement their evidence. This was done by means of Mr Cummins’ second affidavit. Armada ultimately did not oppose the order sought by the receivers. Gujarat and Mr Jagatramka did not oppose that order.

17    A significant amount of work has been done by the receivers to realise as much of the value in the shares over which they have been appointed receivers as is possible. They have experienced considerable difficulty in selling the shares the subject of the receivership. I am satisfied that the receivers have approached the task entrusted to them with skill and competence and have set about realising the assets for the benefit of the Australian creditors of Gujarat and Mr Jagatramka as efficiently as possible.

18    For these reasons, I am satisfied that I should make an order remunerating the receivers in the amount sought by them.

19    The other applications presently before the Court comprise an application by Armada for an order that it be paid a share of the remaining proceeds of the sale of the shares covered by the receivership and a similar application made by Coeclerici.

20    Every effort has been made to ascertain whether other creditors wish to claim against the fund. As far as the receivers and the Court are aware, no other creditor currently presses a claim against the fund.

21    Both Armada and Coeclerici agree that the balance of the moneys held by the Court after the payment out to the receivers of their remuneration and expenses should be paid to them. The dispute between them concerns the basis upon which payment out should be ordered.

22    Neither Gujarat nor Mr Jagatramka opposes the applications made by Armada and Coeclerici.

23    Coeclerici contends that I should simply split the net amount left after payment to the receivers, half to Coeclerici and half to Armada. Armada, on the other hand, argues that the remaining funds should be paid out, at least on an interim basis, in proportion to the relative amounts of the US dollar component of the judgments ordered in favour of each of Armada and Coeclerici. The US dollar component is by far the most significant component of both judgments and constitutes a reasonable basis for determining relativities if the approach which I take is to apply proportionality rather than absolute equality dollar for dollar. If that is done, Armada would receive 64.78% of the remaining funds and Coeclerici would receive 35.22% of the remaining funds.

24    Thus, the remaining issue for determination is whether each of Armada and Coeclerici should receive 50% of the remaining funds held by the Court after payment out to the receivers or the percentages which I have noted at [23] above.

Consideration

25    Rule 2.42(1)(b) of the Federal Court Rules 2011 (FCR) provides that money paid into Court in a proceeding must ordinarily be paid into the Litigants’ Fund. The Court may make a special order as to the account into which moneys paid into Court should be deposited. But, in the absence of such a special order, such funds must be paid into the Litigants’ Fund. In the FCR, that expression is defined as meaning the “Federal Court of Australia Litigants’ Fund established under Div 2.5 [FCR]”.

26    Rule 2.43(1) FCR provides that money paid into Court under r 2.42 may be paid out or applied only in accordance with an order of the Court. The Court has a discretion as to the disposition of money held in its Litigants’ Fund. Nonetheless, that discretion must be exercised judicially and be anchored in a rational process of reasoning.

27    Nothing in the FCR or the Federal Court of Australia Act 1976 (Cth) specifically addresses a set of circumstances such as those with which I am presently confronted.

28    Coeclerici argued that the receivership was established by, at the expense of and for the benefit of Coeclerici. It submitted that it had prosecuted the appointment of receivers at significant expense. In addition, it submitted that the proposed distribution is an interim and limited distribution. It will not be sufficient to satisfy in full the debts owed to Coeclerici and Armada. Coeclerici argued that, in circumstances where both award creditors are owed a significant sum of money, there is no reason why one should receive a higher amount than the other. Finally, Coeclerici submitted that the present case is not a case involving bankruptcy or insolvency where the pari passu principle would more naturally apply.

29    Coeclerici went on to submit that the Court should apply the equitable maxim “equality is equity”. In support of that proposition and its applicability to the present case, Coeclerici cited Trio Capital Ltd (Administrators Appointed) v ACT Superannuation Management Pty Ltd (2010) 79 ACSR 425 (Trio Capital) at 434 [34]. But Trio Capital was a case where administrators were seeking to claim their fees from 12 separate managed investment schemes. The issue in Trio Capital was whether the administrators could take their fees in equal amounts from those funds notwithstanding that the work done by them was not spread equally across all 12 funds. Justice Palmer concluded that some of the administrators’ costs should be equally apportioned across all schemes while others should more accurately reflect the actual work done. The facts of Trio Capital are quite different from the facts of the present case. Here, there is one common fund against which two claims are made. The claimants have equal status as judgment creditors, although the amount of each judgment is substantially different.

30    As a fall back position, Coeclerici submitted that, if the Court is minded to make an order for the pari passu distribution of the fund, it should do so upon the basis of the amounts presently owed to each of Coeclerici and Armada (as distinct from the judgment amounts awarded in favour of each of them, as sought by Armada). In this regard, Coeclerici informed the Court that it had received payments of USD200,000 on 29 August 2013 and USD1,000,000 on 11 September 2013 in reduction of the award debt. There was no indication from Armada or any evidence before me as to what sums of money (if any) had been received by it in reduction of the debt owed by Gujarat to it.

31    As submitted by Armada, a common fund has been created as a result of the sale of certain shares by the receivers from which the judgments of Armada and Coeclerici can be partially satisfied. Armada submitted that the Court should order a distribution on a proportionate basis relative to the value of the respective judgments measured by a comparison of the US dollar components in each case. Armada advanced a number of reasons for this proposition.

32    First, it submitted that the Court should draw significant guidance from the method of distribution adopted by the legislature in relation to unsecured creditors in other circumstances. For example, Armada submitted that, in the case of a winding up under the Corporations Act 2001 (Cth) or a bankruptcy under the Bankruptcy Act 1966 (Cth), the relevant statutory provision provides that all debts proven in the insolvency rank equally and, if the proceeds of the property of the insolvent party are insufficient to meet them in full, they shall be paid proportionately (see s 108 of the Bankruptcy Act and s 555 of the Corporations Act). Armada submitted that, although technically Gujarat and Mr Jagatramka are not demonstrably insolvent, the present circumstances are analogous to an insolvency scenario. It was said that a common fund has been created by the sale of the judgment debtor’s property and that the amount of that fund is insufficient to meet all present claims.

33    Armada also submitted that the Courts have solved a similar conundrum by making a proportionate distribution in other circumstances. In support of that proposition, Armada cited Windsor Mortgage Nominees Pty Ltd v Cardwell [1979] ACLC 32,195 at 32,200; Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (1994) 49 FCR 334 at 360–361, 365 D; Warner, in the matter of GTL Tradeup Pty Limited (In Liq) (2015) 104 ACSR 633 at 647–648 [52]; Re Global Finance Group Pty Ltd (In Liq) (2002) 26 WAR 385 at 431–433 [230]–[242] and Sutherland; Re French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361 at 418 [176].

34    I have found the judgment of Campbell J (as his Honour then was) in Sutherland; Re French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361 at 417–422 [173]–[193] to be most helpful. At 418 [176], his Honour said:

The maxim “equality is equity” does not require that the available funds be divided between all people who can establish that, at one time, they had a claim on a bank account in which property held on trust for several people have been mixed. It can readily enough be accepted that if several people have an equal right to be paid from a particular fund, and the fund proves insufficient, their claims will abate rateably. This happens in relation to general legacies (Re Farmer; Nightingale v Whybrow [1939] Ch 573; Re Wilson (decd); Hartley v Marie Curie Hospital [1940] Ch 966), and with the proportionate abatement of provable debts which creditors sustain in a bankruptcy or winding up. Rateable abatement does not automatically apply whenever there is a mixed fund because there is a preliminary question, the answer to which cannot be assumed, of whether all the claimants on the fund, in the form the fund takes at the time of trial, have claims which are equal.

35    I am persuaded by the submissions of Armada to make an order reflecting a proportionate distribution of the available funds essentially for the reasons advanced by Armada in those submissions. I do not think that the mere fact that the receivers were appointed in the Coeclerici proceeding has any logical significance in the resolution of the present problem. Nor do I think that the mere fact that the distribution is likely to be interim should influence the determination of the correct principle which should guide the Court in the present circumstances.

36    For the above reasons, I propose to make orders as sought by Armada. The costs of the present applications will be costs in the proceedings and be payable out of any further recoveries in due course.

Associate:

Dated:    7 August 2015