FEDERAL COURT OF AUSTRALIA

Official Assignee in Bankruptcy of the Property of McCormick v McCormick [2018] FCA 410

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding in the High Court of New Zealand In the matter of the bankruptcy of Stephen Anthony McCormick; Between Trilogy Funds Management Limited (ACN 080 383 679) as the responsible entity for the Pacific First Mortgage Fund (ARSN 088 139 477), and Stephen Anthony McCormick (CIV 2016 - 409 – 000525) (the foreign proceeding), be recognised as a foreign proceeding pursuant to Art 17(1) of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law) and s 6 of the Cross-Border Insolvency Act 2008 (Cth);

2.    The foreign proceeding be recognised as a foreign main proceeding pursuant to Art 17(2) of the Model Law;

3.    The administration, realisation and distribution of the respondent’s assets located in Australia be entrusted to the applicant pursuant to Art 21(1)(e) of the Model Law;

4.    All powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act 1966 (Cth) be made available to the applicant pursuant to Art 21(1)(g) of the Model Law;

5.    Title to the property described as Lot 5 on Survey Plan 205875, Title Reference 50728618, situated at Unit 5, 6 Miami Key, Broadbeach Waters, in the State of Queensland, be vested in the applicant as registered owner of an estate in fee simple pursuant to Art 21(1) of the Model Law;

6.    Any party affected by these orders is at liberty to apply upon five (5) business days’ notice.

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

REASONS FOR JUDGMENT

RANGIAH J:

1    The applicant is the Official Assignee for the Southern Region of New Zealand. The respondent was made bankrupt by an order of the High Court of New Zealand made on 19 October 2017. Under s 101 of the Insolvency Act 2006 (NZ), all property (whether in or outside New Zealand) belonging to the bankrupt vests in the Official Assignee.

2    The respondent is the registered owner of a property at Broadbeach Waters at the Gold Coast in Queensland. The applicant wishes to deal with that property in the course of his administration of the bankrupt estate.

3    For that purpose, the applicant applies for recognition of the bankruptcy proceeding in the High Court of New Zealand as a “foreign main proceeding” pursuant to Art 17 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law). Section 6 of the Cross-Border Insolvency Act 2008 (Cth) (the Act) provides that the Model Law has the force of law in Australia.

4    On 5 February 2018, I made orders for advertising and service of the application upon the respondent, his creditors and the mortgagee of the Gold Coast property. There was no appearance by any party other than the applicant at the hearing of the application.

5    Article 15(1) of the Model Law provides that a foreign representative may apply to the Court for recognition of the foreign proceeding in which the foreign representative has been appointed.

6    Article 17(1) of the Model Law provides that, subject to Art 6, a foreign proceeding shall be recognised if the requirements set out in that clause are satisfied. Under Art 17(2), the foreign proceeding shall be recognised as a “foreign main proceeding”, or “a foreign non-main proceeding”.

7    The criteria for recognition of a foreign proceeding are found in the Act, the Model Law and the Federal Court (Bankruptcy) Rules 2016 (Cth) (the Bankruptcy Rules). These criteria have been described as falling into two broad categories, namely “status-based criteria” and “procedural criteria”: Gainsford v Tannenbaum (2012) 216 FCR 543 at [25] (Logan J); Kapila, in the Matter of Edelsten [2014] FCA 1112 at [26] (Beach J).

8    The status-based criteria are:

(a)    the relevant proceeding must be a “foreign proceeding” within the meaning of Art 17(1) and Art 2(a) of the Model Law;

(b)    the applicant must be a “foreign representative” within the meaning of Art 17(1) and Art 2(d); and

(c)    pursuant to Art 17(1)(d), the application must be submitted to a Court to which Art 4 of the Model Law, through s 10 of the Act, refers.

9    The procedural criteria are:

(a)    the application must satisfy Art 17(1)(c) of the Model Law, which requires compliance with the requirements of Art 15(2);

(b)    there must be compliance with s 13 of the Act; and

(c)    there must be compliance with r 14.03 of the Bankruptcy Rules.

10    If these criteria are satisfied, the following further issues arise:

(a)    whether the foreign proceeding is a “foreign main proceeding” within Art 17(2)(a) of the Model Law, or a “non-main proceeding” within Art 17(2)(b);

(b)    whether there is any reason to refuse recognition of the foreign judgment under Art 6 on the basis that recognition would be manifestly contrary to the public policy of Australia;

(c)    what orders should be made under Art 21; and

(d)    whether, for the purposes of Art 21(2), the interests of the creditors in the State, and for Art 22(1), the interests of the creditors and other interested persons, including the debtor, are adequately protected.

The status-based criteria

11    Article 2 of the Model Law defines the expressions “foreign proceeding” and “foreign representative” as follows:

(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;

…

(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;

12    The application is accompanied by a certified copy of an order of the High Court of New Zealand which states:

On the application of Trilogy Funds Management Limited (ACN 080 383 679) as the responsible entity for the Pacific First Mortgage Fund (ARSN 088 139 477), carrying on business in New South Wales, a creditor of the debtor, the court orders that Stephen Anthony McCormick, of Christchurch, General Manager, be adjudicated bankrupt…

13    As has already been mentioned, s 101 of the Insolvency Act (NZ) provides that all property belonging to or vested in the bankrupt vests in the Assignee. Under s 3 of that Act, the expression “Assignee” includes the Official Assignee for New Zealand.

14    I am satisfied that the New Zealand proceeding is a “foreign proceeding” and that the applicant is a “foreign representative” within the meaning of those expressions in Art 2 of the Model Law.

15    This Court is one to which Art 4 of the Model Law applies, pursuant to s 10 of the Act.

16    I find that the status-based criteria are satisfied.

Procedural criteria

17    Article 17(1)(c) of the Model Law provides that the application must meet the requirements of Art 15(2). Article 15(2) requires that an application for recognition be accompanied by: a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or, a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or, any other evidence acceptable to the Court of the existence of the foreign proceeding and of the appointment of a foreign representative.

18    The certificate of the High Court of New Zealand affirms the existence of the foreign proceeding. Section 101 of the Insolvency Act (NZ) demonstrates the appointment of the applicant as foreign representative, as does the affidavit of the applicant accompanying the application. The requirements of Art 15(2) are satisfied.

19    Section 13 of the Act provides that in addition to the requirement in Art 15(3) of the Model Law that the application for recognition be accompanied by a statement identifying all foreign proceedings in respect of a debtor that are known to the foreign representative, the application must be accompanied by a statement identifying, relevantly, all proceedings under the Bankruptcy Act 1966 (Cth) in respect of the debtor.

20    The applicant deposes that the only foreign proceeding of which he is aware in respect of the respondent is the proceeding in the High Court of New Zealand in which the bankruptcy order was made. The requirements of Art 15(3) are satisfied. The applicant also deposes that he is not aware of any proceedings under the Bankruptcy Act in respect of the respondent. Accordingly, s 13 of the Act has been complied with.

21    Rule 14.03(2) of the Bankruptcy Rules requires that the application must: be accompanied by the statements mentioned in Art 15 of the Model Law and s 13 of the Act; be accompanied by an affidavit verifying those matters; and name the foreign representative as the applicant and the debtor as the respondent. Those requirements have been complied with.

22    Rule 14.03(3) and (4) of the Bankruptcy Rules require the foreign representative to file an interim application seeking directions and to serve a copy of the application and other documents upon the respondent and any other persons the Court directs that service be effected upon at least five days before the date fixed for hearing.

23    The applicant filed an interim application and, on 5 February 2018, I ordered that the application and other court documents be served upon the respondent, the respondent’s creditors and Perpetual Trustee Company Limited, the mortgagee of the property at the Gold Coast. I also ordered that the applicant publish a notice of the filing of the application in accordance with Form B20 in The Press newspaper in Christchurch, New Zealand, where the respondent has his principal place of residence.

24    The applicant has filed affidavits deposing to the advertising of the application and service in compliance with the orders made. These affidavits demonstrate that r 14.03 of the Bankruptcy Rules has been complied with.

Recognition as a foreign main proceeding

25    Article 17(2)(a) of the Model Law provides that 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.

26    Article 16(3) of the Model Law 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 interest on a regular basis and is, therefore, ascertainable by third parties; and

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

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

27    The applicant’s affidavit annexes a copy of the respondent’s statement of affairs, in which the respondent discloses that he lives in New Zealand and has done so for at least five years. I am satisfied that the respondent’s habitual residence is in New Zealand. There is no evidence to displace the presumption that New Zealand is the centre of his main interest.

28    I am therefore satisfied that the foreign proceeding is a foreign main proceeding.

Whether recognition of foreign proceeding would be contrary to the public policy of Australia

29    Article 6 provides that nothing in the Model Law prevents a Court from refusing to take action governed by the Model Law if the action would be manifestly contrary to the public policy of the State.

30    Recognition of the foreign proceeding would not be contrary to the public policy of Australia.

What orders should be made

31    Article 21 of the Model Law provides:

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:

…

(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;

…

(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.

…

32    Rule 14.08(1) of the Bankruptcy Rules provides:

If the Court has made an order of recognition of a foreign proceeding, any application by the applicant for relief under paragraph (1) of the article 21 of the Model Law must be made by filing an interim application and any supporting affidavit in accordance with form B3.

33    This suggests that an applicant must wait until the Court has made an order for recognition of a foreign proceeding before filing an interim application seeking relief under Art 21(1) of the Model Law. In this case, the applicant filed, as an annexure to his originating application, an interim application seeking relief under Art 21 of the Model Law.

34    On 5 February 2018, I ordered that the interim application be served upon the respondent, his creditors and the mortgagee of the property, with the intention that the interim application would be heard at the same time as the application for recognition of the foreign proceeding.

35    A separate interim application for relief under Art 21(1) of the Model Law will be appropriate where, for example, orders setting aside voidable transactions or more contentious means of collecting and realising the assets of the estate are sought. In such cases, there may well be parties other than the debtor and the creditors who have not been served, but who are interested in the question of relief. The relief sought in the present case is not of that kind.

36    The applicant’s interim application seeks orders that:

(a)    under Art 21(1)(e), the administration, realisation and distribution of the respondent’s assets located in Australia be entrusted to the applicants;

(b)    under Art 21(1)(g), that all powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act be conferred upon and exercisable by the applicant;

(c)    under Art 21(1)(g), that title to the Gold Coast property be vested in the applicant as a registered owner of an estate in fee simple.

37    I note that in Kapila, Beach J made orders in accordance with Art 21(1)(e) and (g) of the Model Law without a separate hearing following the recognition of the foreign proceeding. I accept the applicant’s submission that the relief he seeks under Art 21(1)(e) and (g) of the Model Law is to give effect to the recognition of the bankruptcy, and that it would be an unnecessary further expense to require the applicant to come back to the Court for a separate hearing to obtain such consequential orders. Pursuant to r 1.04(1) of the Bankruptcy Rules, Pt 14 applies unless the Court orders otherwise. I am satisfied that it is appropriate to dispense with any requirement to make a further application for interim relief.

38    Under s 11 of the Act, Art 21(1)(g) of the Model Law allows the Court to grant any additional relief that may be available to a trustee under the Bankruptcy Act. It is appropriate to grant the relief described in subparas (a) and (b) of [36] above. If this were an Australian bankruptcy, vesting of the bankrupt’s property would automatically occur under s 58 of the Bankruptcy Act and no further order would be needed for title to the property to be transferred to the trustee. It is also appropriate to grant the relief set out in subpara (c) of [36] above.

Whether the interests of the creditors and other interested persons are adequately protected

39    Article 22(1) of the Model Law provides that in granting relief under Art 21, the Court must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected.

40    Under Art 21(2), the Court may only entrust the distribution of all or part of the debtor’s assets located in this State to the foreign representative if the Court is satisfied that the interests of creditors in this State are adequately protected.

41    The interests of the respondent and the creditors, including those in Australia, are adequately protected under the bankruptcy proceedings in New Zealand. The mortgagee has a registered mortgage over the property and its interests are not adversely affected. Therefore, I am satisfied of the matters set out in Arts 21(2) and 22(1) of the Model Law.

42    I will make the orders sought by the applicant.

Associate:    

Dated:    28 March 2018