FEDERAL COURT OF AUSTRALIA

Chong, in the matter of CNA Group Ltd v CNA Group Ltd [2015] FCA 1148

IN THE MATTER OF CNA GROUP LIMITED (UNDER JUDICIAL MANAGEMENT) (RCN NO. 199000449K)

THE COURT ORDERS THAT:

1.    The name of the Plaintiff and the Defendant be amended to remove the word ‘interim’.

2.    Pursuant to s 6 of the Cross-Border Insolvency Act 2008 (Cth) (Act) and clause 1 of Article 17 of the Model Law on Cross Border Insolvency, which is Schedule 1 to the Act (Model Law), the proceeding HC/OS 658/2015 in the High Court of the Republic of Singapore (Singapore Proceeding), in which the Plaintiffs were appointed as Interim Judicial Managers and subsequently as Judicial Managers of the Defendant on 21 July 2015 and 14 September 2015 respectively, be recognised as a foreign proceeding within the meaning of Article 2(a) of the Model Law.

3.    Pursuant to s 6 of the Act and clause 2(a) of Article 17 of the Model Law, the Singapore Proceeding be recognised as a foreign main proceeding for the purpose of the Model Law.

4.    Relief pursuant to Article 21(1)(a) of the Model Law in the form of a stay of individual actions or proceedings concerning the Defendant’s assets, rights, obligations or liabilities to the extent that the same have not been stayed pursuant to Article 20(1)(a) of the Model Law.

5.    Pursuant to Article 21 of the Model Law, the administration or realisation of all the Defendants assets in Australia be entrusted to the Plaintiffs.

6.    The costs of this application (including reserved costs) be paid out of the assets of the Defendant.

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

IN THE MATTER OF CNA GROUP LIMITED (UNDER JUDICIAL MANAGEMENT) (RCN NO. 199000449K)

REASONS FOR JUDGMENT

RELIEF SOUGHT

1    The plaintiff, Mr Tam Chee Chong and Mr Andrew Grimmett as joint and several former interim judicial managers of the defendant (CNAG), now the judicial managers, seek certain stay orders in Australia. They rely on various affidavits from which the following events emerge.

2    CNAG is listed on the Singapore Stock Exchange (Mainboard), with its registered office in Singapore. On 13 July 2015, proceedings were commenced in the High Court of Singapore for an order to place CNAG under judicial management and for an order that interim judicial managers be appointed to manage CNAG's affairs pending the hearing of the judicial management application. On 21 July 2015, the High Court of Singapore appointed the interim judicial managers in proceeding HC/OS 658/2015. Those interim judicial managers were appointed as judicial managers on 24 September 2015.

LEGISLATIVE FRAMEWORK

3    Section 6 of Cross-Border Insolvency Act 2008 (Cth) (Act) provides that, subject to the Act, the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade law (Model Law), the text of which is set out in Sch 1 to the Act has the force of law in Australia. The Model Law was adopted by the United Nations Commission on International Trade Law (UNCITRAL) in May 1997. The Explanatory Memorandum to the Act which adopts it, discusses the effect of cross-border insolvencies in giving rise to uncertainty, risk and ultimately cost to businesses.

4    For the purposes of this proceeding it suffices to note that by the mechanisms discussed below, as addressed by Ms Blewett for the judicial managers in detailed submissions which I largely adopt, in the case of a foreign main proceeding, insolvency is presumed. The Model Law then allows for a stay against a debtor as if the stay or suspension arose under the Bankruptcy Act 1966 (Cth) or the Corporations Act 2001 (Cth) in relation to an Australian bankruptcy or insolvency. It follows that if certain procedural and substantive matters are satisfactorily proven, orders giving effect to such a stay may be made.

Statutory framework

5    Section 10 of the Act designates this Court as a court competent to perform the function under the Model Law relating to recognition of foreign proceedings. Division 15A of Federal Court (Corporations) Rules 2000 (Cth) (FCCR) also apply.

6    Pursuant to Art 17(1) of the Model Law, a foreign proceeding shall be recognised if:

(a)    it is a proceeding within the meaning of Art 2(a);

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

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

(d)    the application is made before a court referred to in Art 4.

7    Pursuant to Art 17(2)(a) of the Model Law, a foreign proceeding shall 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’.

8    The relevant definitions for the purpose of the Model Law are set out in Art 2, relevantly:

(a)    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 reorganisation or liquidation’ (Art 2(a));

(b)    a ‘foreign representative’ means ‘a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding’ (Art 2(d)); and

(c)    a ‘foreign main proceeding’ means ‘a foreign proceeding taking place in the State where the debtor has the centre of its main interests’ (Art 2(b)).

9    The effect of recognition of a foreign main proceeding is set out in Art 20 (1) which provides that:

…

(a)    [the] [c]ommencement 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; and

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

10    Article 21(1)(a) authorises the Court, upon recognition of a foreign proceeding, to grant any appropriate relief, including 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 Art 20(1)(a), as referred to above.

Recognition of the Singapore Proceeding as a ‘foreign proceeding’

11    The judicial managers' application satisfies the requirements for recognition of a ‘foreign proceeding’ under Art 17(1). The Singapore proceeding, is a ‘foreign proceeding’ within the meaning of Art 2(a) of the Model Law. It is a judicial proceeding conducted in Singapore pursuant to s 227B of the Companies Act (Cap 50) (Singapore). The Singapore Proceeding relates to the insolvency of CNAG, in which the assets and affairs of CNAG are subject to control by the judicial managers who are ultimately supervised by the High Court of Singapore.

12    CNAG was placed under judicial management to achieve one or more of the purposes stated, including a more advantageous realisation of CNAG’s assets than would be effected by winding up. This is made clear by Order 1 of the Orders made by the High Court of Singapore on 21 July 2015.

13    The judicial managers are ‘foreign representatives’ within the meaning of Art 2(d) of the Model Law. They are authorised and given broad powers to administer the reorganisation of CNAG's assets or affairs under the Companies Act (Cap 50) (Singapore), the memorandum and articles of association of CNAG, or any other applicable law. Their powers are identified in Order 3 and Order 4 of the Orders made by the High Court of Singapore on 21 July 2015

Satisfaction of Procedural Requirements

14    An application for recognition of a foreign proceeding must also satisfy the requirements set out in Art 15 of the Model Law, s 13 of the Act and r 15A.3 of the FCCR.

Article 15 of the Model Law

15    As counsel notes, there are two requirements to be met under Art 15 of the Model Law. In effect, the application for recognition must be accompanied by the following:

(a)    a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative, a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative or, in the absence of such evidence, any other evidence acceptable to the Court of the existence of this foreign proceeding, and of the appointment of the foreign representative; and

(b)    a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative.

16    These procedural requirements have been met. Further, there is evidence that ‘there are no “foreign proceedings” commenced in relation to CNAG within the meaning of Article 2(a) of the Model Law’, other than the Singapore Proceeding.

Section 13 Statement and Interlocutory Application

17    In addition to the Art 15 statement, s 13 of the Act requires that an application be accompanied by an additional statement confirming that:

(a)    no proceedings have been issued against CNAG under the Bankruptcy Act 1966 (Cth);

(b)    no proceedings have been issued against CNAG under Ch 5 or s 601CL of the Corporations Act; and

(c)    there has been no appointment of a receiver, within the meaning of s 416 of the Corporations Act, or controller or a managing controller, within the meaning of s 9 of the Corporations Act, in relation to the property of CNAG.

Recognition of the Singapore Proceeding as a ‘foreign main proceeding’

18    The judicial managers seek recognition of the Singapore Proceeding as a ‘foreign main proceeding’ for the purpose of Art 17(2) of the Model Law. In that regard, the centre of CNAG’s main interests is Singapore. The judicial managers rely on the presumption under Art 16(3) of the Model Law that the debtor's registered office is the centre of its main interests. CNAG's registered office is at 28 Kaki Bukit Crescent, Kaki Bukit Techpark 1, Singapore 416259.

19    To the extent any additional evidence of CNAG's centre of main interest may be required, then the following are relevant factors to be considered:

(a)     CNAG was incorporated in Singapore under the Companies Act (Cap 50) (Singapore) on 26 January 1990. Since incorporation, it has maintained a presence and conducted business in Singapore;

(b)    CNAG was listed on the Singapore Stock Exchange (SESDAQ) in March 2005 and on the Singapore Stock Exchange (Mainboard) in September 2007;

(c)    CNAG's headquarters are located in Singapore; and

(d)    all of CNAG's directors reside in Singapore.

20    Similar matters were considered relevant in Wild (Foreign Representative) v Coin Co International PLC (Administrators Appointed); In the Matter of Coin Co International PLC (Administrators Appointed) [2015] FCA 354 per Foster J (at [66]).

21    In Young, Jr, Re Buccaneer Energy Limited v Buccaneer Energy Limited [2014] FCA 711 (at [10]-[11]), Jagot J also had regard to the ‘overall effect’ of an annual report as it concerned the operations and activities of the company. CNAG's annual reports for the financial years 2012 and 2013 identify that more than half of CNAG's revenue related to its operations in Singapore.

Relief under Art 21 of the Model Law

22    The judicial managers also seek an order under Art 21(1)(a) for a stay of the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent that they have not been stayed under Art 20(1)(a).

23    On the evidence before the Court, I am satisfied that CNAG's assets in Australia consist exclusively of 10,216,860 shares in Urbanise.com Limited (Urbanise shares), a company listed on the Australian Stock Exchange. The value of the Urbanise shares held by CNAG is estimated at S$9.8 million. There was a moratorium period of up until 22 September 2015 before these shares could be sold in the open market.

24    The judicial managers are concerned to protect the Urbanise shares.

25    In granting or denying additional relief under Art 21, the Court must be satisfied that ‘the interests of creditors and other interested persons, including the debtor, are adequately protected’: Model Law, Art 22.

26    The granting of additional relief will not prejudice the interests of any creditors. To the contrary, it will assist in the achievement of the aims of the judicial managers of CNAG.

Consequential Orders

27    Rule 15A.7 of the FCCR provides that if the Court makes an order for recognition of a foreign proceeding under Art 17 of the Model Law or makes any order under Art 21, the plaintiff, must, as soon as practicable after the order is made:

28    Rule 15A.7 of the FCCR provides as follows:

Notice of order for recognition, withdrawal etc

(1)    If the Court makes an order for recognition of a foreign proceeding under article 17 of the Model Law, or makes any order under article 19 or 21 of the Model Law, the plaintiff must, as soon as practicable after the order is made, do all of the following:

(a)    have the order entered;

(b)    serve a copy of the entered order on the defendant;

(c)    send a notice of the making of the order in accordance with Form 21 to each person whose claim to be a creditor of the defendant is known to the plaintiff;

(d)    publish a notice of the making of the order in accordance with Form 21, in a daily newspaper circulating generally in the State or Territory where the defendant has its principal, or last known, place of business.

(2)    The Court may direct the plaintiff to publish the notice in accordance with Form 21 in a daily newspaper circulating generally in any State or Territory not described in paragraph (1) (d).

(3)    If the application for recognition is withdrawn or dismissed, the plaintiff must, as soon as practicable, do all of the following:

(a)    for a dismissal, have the order of dismissal entered;

(b)    serve a copy of the entered order of dismissal or notice of the withdrawal, on the defendant;

(c)    send a notice of the dismissal or withdrawal in accordance with Form 22 to each person whose claim to be a creditor of the defendant is known to the plaintiff;

(d)    publish a notice of the dismissal or withdrawal in accordance with Form 22, in a daily newspaper circulating generally in the State or Territory where the defendant has its principal, or last known, place of business.

(4)    The Court may direct the plaintiff to publish the notice in accordance with Form 22 in a daily newspaper circulating generally in any State or Territory not described in paragraph (3) (d).

29    Although consequential orders for giving notice would be required to be made, in this instance I made orders following the first hearing on 10 September 2015 for notice of the orders which were sought to be given in a daily newspaper circulating generally in the State or Territory. There was evidence that although such notification was given in The Australian newspaper, no communication was received from any party and no party gave any notice of intention to appear at the second hearing. In light of that recent publication, I acceded to a request that the requirement to publish a notice of the making of the order described in r 15A.7(1)(d) of the FCCR be dispensed with in this instance. In the circumstances of this case, incurring the further expenditure of advertising would appear to be pointless and would simply erode funds available for creditors. It did not appear to me to be in the interests of justice to require that further expense be incurred. As the order for publication following the first return date of this application was an order that could have been dispensed with, but was not (see r 15A.6(1)), the object of that publication has been satisfied and the further expense would be otiose. There is a broad rule dispensation power under Federal Court Rules 2011 (Cth) r 1.34. Rule 15A.1(b) of the FCCR provides that rules in other Divisions of the FCCR and the other Rules of Court apply to a proceeding in the Court under the Act if they are relevant and not inconsistent with the Division.

CONCLUSION

30    For the foregoing reasons the following orders were made in accordance with the reasoning discussed above:

1.    The name of the Plaintiff and the Defendant be amended to remove the word 'interim'.

2.    Pursuant to s 6 of the Cross-Border Insolvency Act 2008 (Cth) (Act) and clause 1 of Article 17 of the Model Law on Cross Border Insolvency, which is Schedule 1 to the Act (Model Law), the proceeding HC/OS 658/2015 in the High Court of the Republic of Singapore (Singapore Proceeding), in which the Plaintiffs were appointed as Interim Judicial Managers and subsequently as Judicial Managers of the Defendant on 21 July 2015 and 14 September 2015 respectively, be recognised as a foreign proceeding within the meaning of Article 2(a) of the Model Law.

3.    Pursuant to s 6 of the Act and clause 2(a) of Article 17 of the Model Law, the Singapore Proceeding be recognised as a foreign main proceeding for the purpose of the Model Law.

4.    Relief pursuant to Article 21(1)(a) of the Model Law in the form of a stay of individual actions or proceedings concerning the Defendant's assets, rights, obligations or liabilities to the extent that the same have not been stayed pursuant to Article 20(1)(a) of the Model Law.

5.    Pursuant to Article 21 of the Model Law, the administration or realisation of all the Defendants assets in Australia be entrusted to the Plaintiffs.

6.    The costs of this application (including reserved costs) be paid out of the assets of the Defendant.

Associate:

Dated:    26 October 2015