FEDERAL COURT OF AUSTRALIA

Gladstone (Trustee) v Digrigoli [2016] FCA 1136

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 6 of the Cross-Border Insolvency Act 2008 (Cth) (“the Act”) and paragraph 1 of Art 17 of the UNCITRAL Model Law on Cross-Border Insolvency (“the Model Law”), the proceeding of the United States Bankruptcy Court, Southern District of California, case no. 11-00806-LA7, Re Silvana Digrigoli (“the foreign proceeding”), be recognised as a foreign proceeding.

2.    Pursuant to s 6 of the Act and paragraph 2(a) of Art 17 of the Model Law, the foreign proceeding be recognised as a foreign main proceeding.

3.    The following documents be served in accordance with order 5 of these orders:

(a)    a notice in accordance with Form B21 of the Federal Court (Bankruptcy) Rules 2016 (Cth);

(b)    a copy of these orders; and

(c)    a copy of the interim application filed on 15 July 2016.

4.    The documents referred to in order 3 of these orders are to be served by 28 September 2016:

(a)    on the respondent by prepaid post to 3925 Trace Road, Spring Valley, California, 91978, USA;

(b)    on Santo Digrigoli by prepaid post to 295 East Main Street, El Cajon, California, 92020, USA;

(c)    on the Public Trustee of Queensland by delivery to 444 Queen Street, Brisbane, Queensland, 4000; and

(d)    by prepaid post on the persons and entities listed in Annexure B to the amended application filed 27 July 2016 to their addresses listed in that document.

5.    A notice in accordance with Form B21 of the Federal Court (Bankruptcy) Rules be published in “The Daily Transcript” circulating in San Diego by 28 September 2016.

6.    The interim application be listed for hearing on 7 October 2016 at 10.15 am.

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

REASONS FOR JUDGMENT

RANGIAH J:

1    On about 19 January 2011, the respondent filed a bankruptcy petition in the United States Bankruptcy Court, Southern District of California. The applicant was appointed as the respondent’s bankruptcy trustee by that Court with effect from about 19 January 2011.

2    The applicant applies to this Court for recognition of the US Bankruptcy Court proceeding as a foreign proceeding pursuant to Art 15 and Art 17 of the UNCITRAL Model Law on Cross-Border Insolvency (“the Model Law”).

3    The respondent resides in the United States, but she and her former husband owned a property at Kowguran, near Miles, in Queensland. The US Bankruptcy Court authorised the applicant to sell the property, but in the course of organising the sale the applicant became aware that the property had already been sold on the instructions of the local Council for unpaid rates. The Council paid the amount of about $67,000 to the Public Trustee of Queensland as unclaimed money. The Public Trustee has not agreed to transfer the funds to the applicant, prompting the present application.

4    On 27 July 2016, I made orders for the service of the amended application and other material on the respondent, her former husband, her creditors and the Public Trustee and ordered that the hearing be listed for 8 September 2016. I am satisfied that the material has been served in accordance with the orders I made. There has been no appearance at the hearing by any of the parties served.

5    Pursuant to s 6 of the Cross-Border Insolvency Act 2008 (Cth) (“the Act”), the Model Law has the force of law in Australia. Article 15 of the Model Law provides:

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.

…

6    Article 17 of the Model Law provides:

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.

…

7    These elements were categorised as “procedural” and “status-based” by Logan J in Gainsford v Tannenbaum (2012) 216 FCR 543 at [25], [26] and [29].

8    The applicant must satisfy the requirements of:

(a)    paragraph 2 and paragraph 3 of Art 15 of the Model Law;

(b)    s 13 of the Act;

(c)    paragraphs 1 and 2 of Art 17 and Art 4 of the Model Law.

9    The applicant has placed into evidence a “notice of bankruptcy case filing” issued by the US Bankruptcy Court which confirms the existence of the proceeding and the appointment of the applicant as bankruptcy trustee. I am satisfied that paragraph 2 of Art 15 is met. I am also satisfied that paragraph 3 of Art 15 and s 13 of the Act have been complied with.

10    Section 10 of the Act provides that the Federal Court of Australia is taken to be specified in Art 4 of the Model Law for the purposes of paragraph 1(d) of Art 17.

11    The expression “foreign proceeding” in paragraph 1(a) of Art 17 is defined in Art 2(a) of the Model Law as:

…[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 re-organization or liquidation.

12    A bankruptcy proceeding under Ch 7 of the US Bankruptcy Code was recognised as a “foreign proceeding” by Beach J in Kapila v Edelsten [2014] FCA 1112 at [32]. The proceeding in the US Bankruptcy Court in this case was also under Ch 7 of the US Bankruptcy Code.

13    The expression “foreign representative” in paragraph 1(b) of Art 17 is defined in Art 2(d) of the Model Law as:

…[A] person or body…authorized in a foreign proceeding to administer the re-organization or the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceedings.

The applicant is the bankruptcy trustee of the respondent’s estate. In Kapila v Edelsten, Beach J recognised a similarly appointed US bankruptcy trustee as a “foreign representative”.

14    Article 6 of the Model Law allows the Court to refuse to recognise a proceeding as a foreign proceeding if it would be manifestly contrary to the public policy of Australia. There are no public policy reasons that might prevent the Court from recognising the US bankruptcy proceedings as a foreign proceeding.

15    I accept that the US bankruptcy proceedings should be recognised as a foreign proceeding pursuant to Art 17 of the Model Law.

16    Paragraph 2 of Art 17 provides that a foreign proceeding shall be recognised as a “foreign main proceeding” if, relevantly, it has taken place in the foreign state (ie country) where the debtor has the “centre of its main interest”.

17    Paragraph 3 of Art 16 provides that, in the absence of proof to the contrary, the debtor’s habitual residence (in the case of an individual) is presumed to be the centre of the debtor’s main interest. The phrase “centre of main interest” is not otherwise defined in the Model Law. However, the authorities have recognised that the centre of main interest:

(a)    should correspond to the place where the debtor conducts the administration of the debtor’s interests on a regular basis and is, therefore, ascertainable by third parties; and

(b)    must be identified by reference to criteria that are both objective and ascertainable by third parties.

Gainsford v Tannenbaum at [34]-[46]; Kapila v Edelsten at [53]; Moore v Australian Equity Investors [2012] FCA 1002 at [18]-[20].

18    It is clear from the evidence that the respondent’s habitual residence is in California in the United States. All the respondent’s named creditors are based in the United States. In these circumstances, I accept that the respondent’s centre of main interest is in California. The US bankruptcy proceedings should be recognised as a foreign main proceeding pursuant to paragraph 2(a) of Art 17 of the Model Law.

19    Rule 14.07(1) of the Federal Court (Bankruptcy) Rules 2016 (Cth) (“the Rules”) requires that:

(1)    If the Court makes an order for recognition of a foreign proceeding under article 17 of the Model Law…the applicant 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 respondent;

(c)    send a notice of the making of the order in accordance with Form B21 to each person who claimed to be a creditor of the respondent and is known to applicant;

(d)    publish a notice of the making of the order in accordance with Form B21 to the Rules in accordance with subpara 14.06(1)(b)(ii) [which provides for the publication of a notice in a daily newspaper circulating generally in the state or territory where the respondent has his or her principal, or last known, places of residence].

20    I am satisfied that “The Daily Transcript”, a daily newspaper of general circulation for the County of San Diego, where both the respondent and her former husband reside, is a suitable newspaper in which to publish the notice.

21    The applicant has filed an interim application in accordance with r 14.08 of the Rules, seeking orders for payment of the funds held by the Public Trustee to the applicant. Rule 14.08(2) of the Rules requires that the interim application be served at least three days before the date fixed for the hearing of the interim application on the respondent, the persons the Court directs to be served with the amended application, and any other person the Court directs. I consider that there should be service of the interim application, not only on the respondent but upon the respondent’s former husband, on her creditors and on the Public Trustee.

22    I will make orders accordingly.

Associate:    

Dated:    16 September 2016